Issue Date: March 25, 2013
AstraZeneca’s Lean New Look
Ending months of speculation, AstraZeneca’s new CEO, Pascal Soriot, last week laid out an ambitious plan to revitalize the ailing drug company. The French businessman detailed fundamental changes to the structure and culture of AstraZeneca’s research organization. The company will cut several thousand research and administrative jobs and focus R&D on three main areas: respiratory, inflammatory, and autoimmune diseases; cardiovascular and metabolic diseases; and oncology. Soriot also touted two partnerships that could signal how the company’s development pipeline will be rebuilt.
Soriot, who joined AstraZeneca in October from Roche, faces an uphill battle. The British drug firm is mired in one of the deepest troughs in the industry. With fresh generics competition for its blockbuster antipsychosis drug Seroquel and four other drugs, the company’s sales fell roughly 17% last year to $28.0 billion. Analysts expect that figure to sink to $21.5 billion by 2018.
While contemplating a new strategy, Soriot visited AstraZeneca sites around the world and found a research organization that had become afraid of taking risks. “We have great people doing great research, but over the years it’s fair to say that we lost some of our scientific confidence, particularly in small molecules,” Soriot told reporters. “That will change.”
Soriot’s first move came in January, when he gave two top executives—R&D chief Martin Mackay and commercial operations head Tony Zook—their walking papers.
The next move came early last week, with the creation of three R&D hubs: Cambridge, England, where AstraZeneca will build a $500 million research facility and headquarters; Gaithersburg, Md., where its biologics unit MedImmune will house most of AstraZeneca’s drug development; and Mölndal, Sweden, which will continue to focus on small-molecule R&D.
Meanwhile, AstraZeneca is ending R&D at its Alderley Park site in Cheshire, England, closing its London office, and downsizing its Wilmington, Del., site. Overall, the changes mean a loss of about 1,600 research jobs and the relocation of 2,500 others.
On Thursday, Soriot unveiled another 2,300 cuts to sales and administrative positions. He put all of the changes in the context of his larger vision for research. The “fragmented footprint” in R&D had made it hard for researchers to collaborate, particularly between small- and large-molecule teams, he said. And some sites were too far from bioscience hubs or were not situated to attract the best scientists.
The decision to invest in Cambridge, England, is based on Soriot’s belief that the city is “one of the rare places in the world that could potentially compete with the likes of Boston and San Francisco,” he told reporters.
The firm’s tightened R&D focus does not mean it is abandoning research on infection, vaccines, and neuroscience, Soriot said. But it does mean AstraZeneca will take a more selective, opportunistic approach to such projects.
Industry watchers are interpreting the moves as a shift away from traditional small-molecule drugs. “This appears to be a clear signal of intent from the new CEO that R&D will become more focused on biologics,” Morgan Stanley stock analyst Peter Verdult said in a note to investors. Of the 40 molecules in AstraZeneca’s clinical-stage pipeline, he noted, about 45% are small molecules and 55% are biologics.
Observers were anxious to hear Soriot’s strategy to bring new drugs into the firm’s relatively shallow pipeline. Although some analysts have suggested that a large acquisition is in order, Soriot said the focus will remain on small acquisitions, licensing deals, and tighter alliances with academia and biotech companies.
To that end, Thursday also brought news of two new partnerships: an expansive deal with Cambridge, Mass.-based Moderna Therapeutics to develop messenger RNA therapeutics and a partnership with Karolinska Institute to establish a translational research center on the Swedish medical school’s campus.
The pacts are a first step in what is sure to be a lengthy rebuilding. AstraZeneca needs to be more aggressive and do “more of every kind of deal”—licensing deals, partnerships, and geographic expansion—said Michael Latwis, an analyst with the health care consultancy Decision Resources.
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