AstraZeneca PLC's new chief executive announced another 2,300 job cuts in sales and administration on Thursday as he set out his stall for turning round the struggling drug maker and returning it to growth.
Pascal Soriot said he planned to focus research on three main disease areas and strike more external deals – such as a new $240-million (U.S.) tie-up with Moderna Therapeutics – in an effort to replenish a sparse new drug pipeline.
But it promises to be a long haul and AstraZeneca is not giving any near-term forecasts. By 2018, however, it expects revenue to "significantly exceed" the current market consensus forecast of $21.5-billion.
Up to 50 per cent of the post-tax, pre-R&D cashflow from existing products will be reinvested in research, external deals and capital investment.
At the same time, Soriot expects to keep underlying margins, before research and development (R&D) costs, in the range of 48 to 52 per cent – and he sought to reassure investors by pledging to maintain a progressive dividend policy.
"We are making an unambiguous commitment to concentrate our efforts and resources on our priority growth platforms and our priority pipeline projects," Soriot said.
The former Roche executive gave an overview of his strategic thinking in a statement issued ahead of a briefing for analysts and investors starting later in the day in New York.
He had already presented a blueprint for overhauling R&D operations on Monday, involving the loss of 1,600 jobs and the consolidation of work in three big centres in Britain, the United States and Sweden.
The combined program of changes will result in a one-time costs of $2.3-billion and yield benefits of around $800-million a year by 2016.
AstraZeneca is shrinking fast, having reduced its global work force by around 10,000 under previous management as it tries to cope with generic competition and disappointing progress in finding new drugs. It now employs a total of 51,700 people worldwide.
Soriot confirmed plans – first disclosed in an interview with Reuters on Monday – to focus future research on three key therapy areas of cancer; cardiovascular and metabolism disorders; and respiratory and inflammatory diseases. It will reduce spending on neuroscience and anti-infectives, including antibiotics.
A former vet by training, Soriot took over last October and signalled a clear change of tack by suspending share buybacks and replacing the firm's previous commercial and research heads.
His approach to the business is expected to see an increased focus on acquisitions of promising drugs and smaller companies.
Many analysts believe AstraZeneca could easily spend $20-billion on acquisitions, given a cash pile of well over $7-billion and scope for borrowing on the basis of strong near-term cash flows.
There has been speculation of a major deal, such as buying Shire, which has a market value of $17-billion, although Soriot favours bolt-on deals and has previously said a major buy is unlikely.
More typical of his favoured deals may be Thursday's alliance with unlisted U.S. biotech firm Moderna Therapeutics, which will see AstraZeneca pay $240-million upfront to access a selection of early-stage so-called messenger RNA drugs.
AstraZeneca shares, which were 0.5 per cent higher in early dealings, trade at a discount to other Big Pharma stocks because it is in a particularly tough spot, with looming loss of exclusivity on its once best-selling medicines and little in the pipeline to replace them.
Its two top drugs – Nexium for stomach acid and the cholesterol pill Crestor – lose U.S. protection in 2014 and 2016, punching a big hole in future revenues.
Analysts, on average, expect sales to fall from $28-billion in 2012 to just over $22-billion in 2017, according to a consensus forecasts compiled by Thomson Reuters.