AstraZeneca to slash 12 percent of its work force as earnings miss expectations

AstraZeneca to cut 8,000 jobs amid weak earnings

LONDON — Pharmaceutical company AstraZeneca PLC said Thursday it plans to ax 8,000 more jobs, or 12 percent of its work force, by 2014 to cut costs as it reported disappointing fourth quarter earnings.

The Anglo-Swedish company, which said the job cuts will be made across all regions and divisions, also warned that the current year will be tough as key products come off patent and it loses unexpected benefits that boosted its 2009 earnings, like the swine flu outbreak.

Shares in the company dropped 2.5 percent to 2,969.5 pence after the weak earnings update, despite the company’s attempts to make its stock attractive by announcing a $1 billion share buyback.

Fourth quarter profit rose 26 percent to $1.56 billion from $1.26 billion, while full-year net profit increased 23 percent to $7.54 billion.

A good performance in emerging markets combined with strong sales of its swine flu drug and wins against generic rivals helped boost revenue by 9 percent over the quarter to $8.95 billion, and by 4 percent over the year to $32.8 billion.

But earnings excluding some restructuring costs and charges of $1.42 a share missed analysts’ forecasts of $1.54-$1.57 per share, and the outlook provided little relief for investors.

Chief Executive Officer David Brennan said the company expected a percentage fall in revenue this year in the mid single digits on a constant currency basis.

Earnings per share for the current year was forecast at $5.75 to $6.15 — substantially lower than the $6.32 it reported for 2009.

“If you throw in the uncertainty surrounding U.S. healthcare reform, it’s clear that 2010 is going to be a challenging year,” Brennan said on a conference call with reporters.

Revenues in 2010 are expected to come under pressure as key products such as child asthma medication Pulmicort, which made sales of $1.3 billion in 2009, and breast cancer treatment Arimidex, which made $1.92 billion, lose patent protection.

The company is also unlikely to book any profits from the two key performers of 2009 — its H1N1 swine flu vaccine and heart medicine Toprol-XL, which benefited from the withdrawal of two generic rivals.

Brennan said the company was extending a cost-cutting program it launched in 2007, which had saved the company $1.6 billion annually at the end of 2009 — at a restructuring cost of $2.5 billion.

Extending the program out to 2014 will cost another $2 billion, with expected benefits of $1.9 billion a year by 2014, he said.

Around 12,600 jobs having already been axed under the program, although Brennan said the net figure was closer to 4,600 after new roles were created by the company, which employs around 63,000 people worldwide.

The new round of cuts will be global, including sales and marketing, business infrastructure, research and development and the supply chain. Brennan said the company’s research & development division would see net cuts of around 1,800, adding there may be some closures of research and development sites or facilities as part of the reorganization.

AstraZeneca raised its earnings forecast twice last year after production setbacks delayed Novartis’ generic version Toprol XL. Its own sales of the drug surged 84 percent to $1.44 billion over the year.

Like other drug makers, the company also received a boost from the swine flu scare, taking a $453 million order from the U.S. government for its H1N1 vaccine.

But the company revealed Thursday that it booked only $389 million of those sales in 2009, adding that how much of the remaining revenue balance will be recorded in 2010 will depend on the US government’s assessment of its vaccine needs in the light of the severity of the outbreak and projected vaccination rates.

Excluding US Toprol-XL and H1N1 vaccine sales, global revenue growth was 4 percent, while U.S. revenue growth dropped to a 2 percent rise from 9 percent the previous year. Emerging markets revenue jumped by 12 percent.

Other than Toprol-XL, cholesterol pill Crestor was the star performer across all markets, with revenue lifting 29 percent to $4.5 billion over the year, outpacing overall growth in the market.

Brennan noted the company has five products awaiting regulatory approval, including blood clot preventer Brilinta, and has added four late stage development projects as he outlined the company’s plan for the next five years.

He said he expected revenue to be in the range of $28 billion to $34 billion each year over that period, with a “significant portion” of current base revenue affected by the loss of market exclusivity on a number of products.

The company also plans to sustain double-digit growth rates in its emerging markets business by adding selected branded generics to its portfolio.

The restart of the share buyback program follows the company’s decision to scrap it in 2008 after the onset of the financial crisis. Buying back shares could allow the company to improve its earnings per share by reducing the number of shares in issue and potentially driving interest in its shares.

Chief Financial Officer Simon Lowth declined to comment on whether the restart of the program was an indication the company intended to spend less on acquisitions. Brennan said the company, which lost Jan Lundberg, its head of global discovery research to U.S. rival Eli Lilly and Co. in November, would look for strategic external partnerships to fulfill its goals.