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AstraZeneca restructuring to drive productivity

Friday, February 3, 2012

In conjunction with the publication of its full year 2011 financial results, AstraZeneca is enacting new restructuring initiatives that will affect approximately 7,300 positions.

The restructuring program is expected to deliver an estimated $1.6 billion in annual benefits by the end of 2014, at an estimated total cost of $2.1 billion. Final estimates for program costs, benefits and headcount impact in all areas of the business are subject to completion of applicable consultation processes.

“Since 2007, when we announced our first major restructuring program, we have taken decisive steps to improve returns on investment, recognizing that this demands concerted, enterprise-wide action,” said David Brennan, CEO, AstraZeneca. “Today’s initiatives should be seen in this strategic context as we continue to reshape our business to improve productivity and innovation and with it our long-term ability to compete in a rapidly changing healthcare environment.”

Within its selling, general and administrative (SG&A) category, AstraZeneca estimates approximately 3,750 positions will be cut. One change already underway is the simplification of the company’s global commercial organization structure. The number of sales and marketing regions has been reduced from five to three and smaller countries are being clustered—a move that will optimize resources, increase shared services and reduce the cost base.

AstraZeneca is accelerating its use of new customer channels to better meet the changing needs of healthcare professionals at lower unit costs. These new channels, which include digital technology and the use of call centers for sales and medical advice, have been established in many developed markets and are now being deployed around the world.

AstraZeneca also plans to accelerate the transformation of its R&D function, which the company unveiled in January 2010. The new program, which will affect nearly 2,200 jobs globally, will create a simpler and more innovative R&D organization with a lower and more flexible cost base. Excess capacity in certain R&D functions will be reduced, matching resources to AstraZeneca’s more focused R&D portfolio.

A focus for much of the change in R&D is the neuroscience therapy area. While the patient need for better medicines in neuroscience is huge and the science promising, advances in treatments have proved elusive for the pharmaceutical industry in recent years, despite significant investment. AstraZeneca believes it will have the best chance of success by combining the company’s internal expertise with innovative external science.

As a result, AstraZeneca will create a new “virtual” neuroscience Innovative Medicines unit (iMed) made up of a small team of roughly 40 to 50 AstraZeneca scientists conducting discovery and development externally, through a network of partners in academia and industry. The team will be based in major neuroscience hubs—Cambridge, U.K., and Boston—and work closely with innovative partners such as the Karolinska Institute in Stockholm, Sweden.

“The creation of a virtual neuroscience iMed will make us more agile scientifically and financially—we will be able to collaborate flexibly with the best scientific expertise, wherever it exists in the world,” said Martin Mackay, president of R&D, AstraZeneca.

The implementation of this new model will lead to a significant reduction in employee numbers and the end of R&D activity at two sites focused on neuroscience: Södertälje, Sweden, and Montreal, Canada. As the location of the company’s largest manufacturing site, and the base of the commercial business covering the Scandinavian markets, Södertälje will remain an important part of the AstraZeneca network. The company’s Montreal facility will close.

In recent years, AstraZeneca has made a number of strategic changes to improve the efficiency and effectiveness of its supply chain and outsource some manufacturing activity, particularly the production of active pharmaceutical ingredients. The new program will drive further efficiency in the supply chain, with a particular focus on support functions in operations. This will affect approximately 1,350 jobs.

“We are acutely aware that these decisions will affect many employees and we will strive to support our people as we implement these changes,” said Brennan.

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