In a bid to streamline operations and increase efficiencies, AstraZeneca (AZN) announced that it intends to lay off approximately 400 employees. The lay-offs will happen at the company’s US business.
Effectively 330 jobs will be cut since the company stated that 70 of the 400 posts are already vacant. Furthermore, AstraZeneca intends to offer the employees the option to voluntarily leave the company.
The company, which has its global headquarters in London, UK, further stated that those affected by the lay-off will either be field or non-sales personnel or based at the company’s US headquarters in Wilmington. All decisions pertaining to the workforce reduction are expected to be made by the end of this year.
We note that a generic threat looms over many of AstraZeneca’s leading drugs. The genericization of key products will make it challenging for the company to drive the top-line. The job cut is a move by the British drugmaker to combat the loss of revenues following the genericization of key drugs.
In addition to generic threats, AstraZeneca’s products already face intense competition in the market. AstraZeneca’s Crestor primarily competes with Pfizer’s (PFE) Lipitor and Merck’s (MRK) Zocor/Vytorin. The entry of generic versions of Lipitor could affect Crestor’s market share.
AstraZeneca to expand in China
Continuing with its efforts to focus on emerging markets, AstraZeneca recently announced that it will expand its footprint in China. The company has decided to invest $200 million for setting up a manufacturing facility in China Medical City. Construction of the facility is expected to be completed by 2013.
We note that AstraZeneca’s operations in emerging markets should stand it in good stead going forward since many of its major products are facing the threat of genericization. Emerging markets represent significant commercial opportunities with factors like pricing pressure in the European Union and intensifying generic competition affecting sales in large pharmaceutical markets.
Neutral on AstraZeneca
Currently, we have a Neutral recommendation for AstraZeneca for the long run. The stock carries a Zacks #3 Rank (Hold rating) for the short run.
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