AstraZeneca is to cut around 1,600 jobs as it overhauls research operations and consolidates drug development work in three major centers in Britain, the United States and Sweden.
The move will see the end of drug development at the company's Alderley Park facility in northwest England, for many years a hub of the group's research and development (R&D) efforts, the drugmaker said on Monday.
New chief executive Pascal Soriot, who will present his detailed strategy plans for the group to investors on March 21, said the program would lead to $1.4 billion in one-time restructuring charges. Annualized benefits of the overhaul are expected to reach approximately $190 million by 2016.
The plan includes a $500 million investment in a new, purpose-built facility in Cambridge, eastern England, where AstraZeneca aims to tap into an environment of world-class academic and clinical life sciences research.
"This is a major investment in the future of this company that will enable us to accelerate innovation by improving collaboration, reducing complexity and speeding up decision-making," Soriot said.
But the decision to stop drug research at Alderley Park, the company's largest R&D site, is a major blow to a region that has relied on a center where AstraZeneca and its predecessor ICI have been discovering medicines for more than 40 years.
It is a setback, too, for Britain's ambitions in pharmaceutical research, following an earlier decision by Pfizer to shutter its R&D site in Sandwich, southern England, and previous cutbacks by AstraZeneca's former management.
Alderley Park lies within the Cheshire parliamentary constituency of finance minister George Osborne.
AstraZeneca said Britain would see 700 of the planned 1,600 job cuts, with a further 650 positions going in the United States, where the company's Wilmington site is being reduced dramatically.
'SAD DAY' FOR UK PHARMA
"It is a sad day for many in the UK's pharmaceutical industry," said Mark Downs, chief executive of the Society of Biology. "On top of the closure of the Pfizer Sandwich site this latest announcement of at least 700 job losses at AstraZeneca risks further reducing the UK's collective capability in drug development."
Unite, Britain's biggest trade union, said AstraZeneca was "creating a skills crisis" in northwest England by axing highly skilled R&D jobs in the middle of an economic downturn.
Mick Cooper, an analyst at Edison Investment Research, said the cuts would hurt but many people would be relieved the group was still committing itself to the UK by investing in Cambridge.
In addition to the changes in R&D, AstraZeneca also plans to move its global corporate headquarters to Cambridge in 2016.
AstraZeneca has already reduced its global workforce by around 10,000 as it has struggled to cope with generic competition and disappointing progress in finding new drugs. It currently employs a total of 51,700 around the world, a spokeswoman said.
Soriot, a former Roche executive who took over last October, has his work cut out to turn around AstraZeneca, which faces loss of patent protection on key drugs, which analysts expect will lead to an expected fall in sales of nearly $6 billion over the next five years.
As a pure pharmaceuticals group, without the cushion of alternative revenue streams, AstraZeneca is particularly exposed to patent losses on key prescription drugs, limiting its room for maneuver.
But Soriot hopes to reinvigorate the company by expanding on existing growth business, including the new heart drug Brilinta, and using acquisitions to buy in promising new medicines.
AstraZeneca shares traded 0.3 percent down by 10:30 a.m. EDT, in line with the European drugs sector.
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