AstraZeneca Discusses Strategy

Zacks

AstraZeneca (AZN) recently discussed its strategy for future growth at its investor day. The company stated that it plans to focus on three core therapy areas: respiratory, inflammation & autoimmunity, cardiovascular & metabolic disease and oncology.

It also plans to accelerate several candidates (including olaparib, tralokinumab, sifalimumab/MEDI-546 and selumetinib) into late stage development. AstraZeneca aims to submit one Biologic License Application (:BLA) every year from 2016.

AstraZeneca is looking to boost its pipeline through early stage research deals, forming global partnerships with one or two of its peers besides existing collaborations with Bristol-Myers Squibb (BMY) and Amgen (AMGN) and in-licensing and bolt-on acquisition.

The company also plans to increase its investment to support key marketed products such as Brilinta. Selling, general and administrative expenses will also be optimized with the help of restructuring activities, which will result in termination of approximately 2,300 employees.

We note that last week, the company announced its plans to initiate strategic reforms in its research and development (R&D) segment. As per the proposed plans, the company’s R&D activities will be primarily centered in three facilities including UK (Cambridge), US (Gaithersburg) and Sweden (Mölndal). AstraZeneca expects to execute these plans by 2016.

The proposed initiative will result in relocation and termination of approximately 2,500 and 1,600 roles, respectively, in the 2013-2016 timeframe and cost approximately $1.4 billion.

We believe that ongoing collaborations and restructuring initiatives emphasize AstraZeneca’s efforts to cut down on cost while maintaining its focus on R&D. AstraZeneca, through these initiatives, is looking to combat the generic competition faced by the company. Generic competition has adversely impacted AstraZeneca’s revenues over the past few quarters. Moreover, products such as Nexium and Crestor are slated to go off patent in the next few years.

AstraZeneca carries a Zacks Rank #3 (Hold). However, other large cap pharma stocks such as Novo Nordisk (NVO) currently look more attractive with a Zacks Rank #2 (Buy).

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