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AstraZeneca Announces Strong Profit Growth for 2009; Up to 10,400 Jobs May Be Cut in Restructuring
Published: 1/29/2010
IHS Global Insight Perspective | |
Significance | U.K. pharma major AstraZeneca increased its profit in 2009 by 23%, and by 24% in the final quarter of the year; the company has also announced a major restructuring programme, which could mean the loss of more than 10,000 jobs by 2014. |
Implications | AstraZeneca is preparing for what it expects to be difficult years, with increasing generic competition, and is planning to downsize its research and development activities, as well as focus on a narrower range of diseases. |
Outlook | AstraZeneca is predicting a reduction in revenue in 2010, associated with increased generic competition, but also with potential litigation costs relating to its schizophrenia drug Seroquel. The company restructuring programme will involve AstraZeneca becoming a leaner, more focused organisation, and by the end of its implementation, the company is hoping to have a more consistent performance financially. |
U.K. pharma major AstraZeneca has announced its full-year results for 2009, as well as results for the fourth quarter of the year; these show a steady growth of 3.8% year-on-year (y/y) in the company's revenue over 2009 as a whole, to US$32.804 billion, on a reported basis, while revenue in the fourth quarter of the year rose 9.2% y/y to US$8.945 billion. The boost in revenue in the last quarter was mainly the result of strong growth in the sales of cardiovascular drug Toprol-XL (metoprolol tartrate/metoprolol succinate) in the United States, as well as U.S. government orders for the company's A/H1N1 influenza (swine flu) vaccine. Net profit for 2009 as a whole increased by an impressive 23.3% y/y, to US$7.521 billion, while in the final quarter of the year, it rose by 24.4% y/y, to US$1.553 billion. Operating income as calculated by IHS Global Insight was up 27.5% in 2009 as a whole, and by 34.5% in the fourth quarter. Considerable reductions in research and development (R&D) investment and cost of sales over the year—amounting to a drop of 12.5% and 14.9%, respectively—contributed to a rise in AstraZeneca's operating margin, as calculated by IHS Global Insight, of 6.2 percentage points in 2009 as a whole, and 5.1 percentage points in the last quarter of the year.
Astra Zeneca Full-Year and Q4 2009 Financial Results, US$ Million | ||||
FY 2009 | % Change | Q4 2009 | % Change | |
Total Revenue | 32,804.0 | 3.8 | 8,945.0 | 9.2 |
- North American Sales | 15,981.0 | 9.0 | 4,288.0 | 4.0 |
- Established Rest of World Sales | 12,471.0 | 4.0 | 3,492.0 | 2.0 |
- Emerging Rest of World Sales | 4,352.0 | 12.0 | 1,165.0 | 10.0 |
Cost of Sales | 5,775.0 | -12.5 | 1,665.0 | -21.2 |
R&D Costs | 4,409.0 | -14.9 | 1,314.0 | -3.0 |
Sales, Distribution, General and Administrative Costs* | 11,630.0 | 3.8 | 3,547.0 | 21.2 |
Operating Income** | 10,990.0 | 27.5 | 2,419.0 | 34.5 |
R&D as a Percentage of Total Revenue | 13.4 | 3.0 pp lower | 14.7 | 1.8 pp lower |
Operating Margin*** | 33.5 | 6.2 pp higher | 27.0 | 5.1 pp higher |
Net Profit | 7,521.0 | 23.3 | 1,553.0 | 24.4 |
Source: AstraZeneca | ||||
AstraZeneca CEO Gives Details of Major Restructuring Programme in 2010–14
The chief executive officer (CEO) of AstraZeneca, David Brennan, gave details of the company's restructuring programme, which is to be implemented in 2010–14. In the first phase of this restructuring programme, initiatives will be introduced that will affect around 3,500 jobs across the group. However, Brennan stressed that with increased employment in the company's Biologics activities, the net job cuts under the first phase of this restructuring programme will be around 1,800. Meanwhile, he suggested that there would be a downsizing of the company's R&D facilities, stating that its R&D site "footprint" would be reduced. In the second phase of the restructuring programme, which will continue until the end of 2009, a total of 10,400 jobs are expected to be affected. In this second phase, the company is planning to realise savings of US$1.9 million by the end of 2014, and under the first phase of the programme, it expects to gain US$1 billion in savings per year. The cost of the first phase of the restructuring programme is estimated by Brennan at US$1 billion, and an additional US$2 billion in restructuring charges are expected to be incurred from 2010 and 2013.
Main Aspects of AstraZeneca Restructuring Programme for 2010–14 |
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Source: AstraZeneca |
Company Faces Possible Liabilities of US$1.2 bil. from Seroquel Legal Cases
Meanwhile, AstraZeneca faces potential liability of up to US$1.2 billion in legal costs due to side effects from its antipsychotic drug Seroquel (quetiapine fumarate), reports The Financial Times. Claims are being made by patients that the drug is connected with obesity and diabetes. The potential payouts also relate to ostensible improper marketing of the drug. The company is also defending around 10,000 lawsuits currently in the United States.
Cardiovascular and Neuroscience Lead the Way in Therapeutic Areas
In terms of performance of therapeutic areas, AstraZeneca's traditionally strong cardiovascular portfolio again led the way in 2009, with revenue from this therapeutic area growing by 20% y/y in actual and 25% y/y in constant exchange rate (CER) terms during the year. The company also showed a solid performance in the neuroscience therapeutic area, with sales growth of 7% y/y in actual and 10% y/y in CER terms. Conversely, AstraZeneca's oncology portfolio recorded a dip in sales during 2009 of 9% y/y in actual and 7% y/y in CER terms.
In terms of individual products, cardiovascular drug Crestor (rosuvastatin calcium) continued to show very impressive sales growth, with an increase of 25% y/y and 29% y/y in actual and CER sales, respectively, reaching a total of US$4.502 billion. Another big performer for AstraZeneca was its schizophrenia and bipolar syndrome treatment Seroquel (quetiapine fumarate), sales of which increased by 9% y/y in actual terms and 12% in CER terms, to 4.866 billion. As indicated above, sales of cardiovascular drug Toprol-XL were instrumental in pushing up AstraZeneca's revenue in the final quarter of the year, and in 2009 as a whole this drug's sales grew by a massive 79% y/y in actual and 84% y/y in CER terms, to 1.443 billion. Meanwhile, sales of A/H1N1 flu vaccine were also essential in raising the company's revenue, totalling US$389 million over the course of the year.
AstraZeneca: Full-Year 2009 Global Sales of Leading Products (US$ mil.) | |||
Brand | Full Year 2009 | % Change, Y/Y (Actual) | % Change, Y/Y (CER) |
Nexium | 4,959 | -5 | -1 |
Losec/Prilosec | 946 | -10 | -10 |
Other | 106 | 19 | 24 |
Total Gastrointestinal | 6,011 | -5 | -2 |
Crestor | 4,502 | 25 | 29 |
Seloken/Toprol-XL | 1,443 | 79 | 84 |
Atacand | 1,436 | -2 | 5 |
Tenormin | 296 | -5 | -5 |
Zestril | 184 | -22 | -17 |
Plendil | 241 | -10 | -7 |
Onglyza | 11 | - | - |
Other | 263 | -3 | -3 |
Total Cardiovascular | 8,376 | 20 | 25 |
Symbicort | 2,294 | 14 | 23 |
Pulmicort | 1,310 | -12 | -10 |
Rhinocort | 264 | -18 | -15 |
Oxis | 63 | -11 | - |
Accolate | 66 | -10 | -8 |
Other | 135 | -17 | -9 |
Total Respiratory | 4,132 | - | 6 |
Arimidex | 1,921 | 3 | 7 |
Casodex | 844 | -33 | -34 |
Zoladex | 1,086 | -5 | - |
Iressa | 297 | 12 | 8 |
Ethyol | 15 | -46 | -46 |
Other | 355 | -13 | -10 |
Total Oncology | 4,518 | -9 | -7 |
Seroquel | 4,866 | 9 | 12 |
Local anaesthetics | 599 | -1 | 4 |
Zomig | 434 | -3 | - |
Diprivan | 290 | 4 | 6 |
Other | 48 | -11 | -4 |
Total Neuroscience | 6,237 | 7 | 10 |
Synagis | 1,082 | -12 | -12 |
Non-seasonal flu | 389 | n/a | n/a |
Merrem | 872 | -3 | 5 |
FluMist | 145 | 39 | 39 |
Others | 143 | 35 | -31 |
Total Infection and Other | 2,631 | 7 | 10 |
Aptium Oncology | 393 | Most Viewed Articles
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