AstraZeneca is cutting a further 7,300 jobs and expects earnings to fall 14 to 18 per cent this year as patents on key drugs expire and governments in Europe and the US squeeze prices.
The drugmaker said the latest phase of cuts, equivalent to 12 per cent of the workforce, would deliver an extra £1bn in annual benefits by the end of 2014. It will cost £1.3bn to implement.
AstraZeneca faces loss of exclusivity on many of its top-selling drugs over the next five years and has few obvious replacements in its pipeline.
The antipsychotic medicine Seroquel, its second-biggest drug, will lose exclusivity in the US in March and also goes off patent in European countries this year.
As a result chief executive David Brennan has been shrinking the business.
“The further expected losses of market exclusivity make for a challenging 2012 outlook,” he said.
The company has already implemented two earlier rounds of cutbacks involving 21,600 job losses since 2007, which has reduced its worldwide headcount to 61,000.
Its sites in the UK are at Alderley Park in Cheshire, Macclesfield, Cambridge, Luton, Avlon near Bristol, Paddington in London, and Brixham in Devon.
The company has not yet disclosed where the jobs will go.
The lack of obvious replacements for products like Seroquel and heartburn treatment Nexium, as well as top-selling heart drug Crestor which goes off patent in 2016, has triggered speculation AstraZeneca may need to make a big acquisition.
Following the poorly received purchase of MedImmune in 2007, the company has so far eschewed another large deal. But that strategy could be up for review, especially with the group casting around for an outsider to replace current chairman Louis Schweitzer.
Doubts about AstraZeneca’s future have grown since a double blow to its new drug pipeline in December when it scrapped an ovarian cancer drug and took a big write down on an experimental antidepressant.
Its existing cardiovascular business is also uncertain, with new drug Brilinta off to a slow start and cholesterol fighter Crestor facing more competition following the arrival of cheap generic copies of Pfizer’s market-leading Lipitor.
Despite the challenges, AstraZeneca is committed to returning cash to shareholders and the company announced it planned to buy back just under £1bn in shares in 2012.
Drug stocks have outperformed the broader market in recent months, with investors attracted by their healthy dividend yields, but growth is elusive for many of the big firms.
Pfizer, the world’s biggest drugmaker, reported a sharp fall in quarterly earnings two days ago and trimmed its 2012 forecasts, while European rival Novartis also said it expected lower profitability this year.