With a major part of its top line exposed to generic competition, AstraZeneca (AZN) is looking towards cost-cutting initiatives to drive the bottom line. The company is seeking to offset the impact of genericization of key products by streamlining its cost structure.
AstraZeneca has announced proposals to shut down the Brixham Environmental Laboratory, Devon, UK, which employs 71 people directly by the end of Mar 2014. The site provides environmental support services, which comprises assessment of pharmaceuticals and chemicals used by a range of industries on the environment.
The company plans to get the services, currently provided by the Brixham Environmental Laboratory, from third parties.
We note that the company initiated a major overhaul of its research and development (R&D) segment in Mar 2013. As per the proposed plans, the company’s R&D activities will be primarily centered in three facilities including the UK (Cambridge), the U.S. (Gaithersburg) and Sweden (Mölndal). The selling, general and administrative (SG&A) segment will also be optimized. The initiative will result in the relocation and termination of approximately 2,500 and 5,050 roles, respectively. Besides streamlining its operations, AstraZeneca is focusing on developing new treatments to make up for revenues lost due to genericization.
The company is working on bolstering its pipeline. It is also looking at suitable acquisitions and deals. In a bid to add late-stage candidates to its pipeline, AstraZeneca entered into a number of acquisition deals (Pearl Therapeutics and Omthera Pharmaceuticals) in the last few months and agreements with companies such as FibroGen, Inc.
AstraZeneca, a large-cap pharma company, presently carries a Zacks Rank #3 (Hold). Companies that currently look attractive include Roche (RHHBY), Johnson & Johnson (JNJ) and Bayer (BAYRY). While Roche is a Zacks Rank #1 (Strong Buy) stock, Johnson & Johnson and Bayer are Zacks Rank #2 (Buy) stocks.
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