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AstraZeneca to Revamp R&D Structure

Zacks Equity Research

AstraZeneca (AZN) recently announced that it plans to initiate strategic reforms in its research and development (R&D) segment. As per 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.

AstraZeneca plans to close down its current headquarters at London and relocate the same to Cambridge. The company will invest $500 million for opening the new facility at Cambridge.  

Meanwhile, the company plans to discontinue the R&D activities at its Alderley Park, Cheshire, UK center. Reduction in the number of position and relocation will primary affect employees working at Alderley Park (Cheshire, UK), Wilmington (Delaware, US) and London offices.

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 the restructuring initiative at AstraZeneca reflects the company’s efforts to cut down on cost while maintaining its focus on R&D. AstraZeneca through these initiatives is looking to combat the generic threat looming over it.

Generic competition has adversely impacted AstraZeneca’s revenues over the past few quarters. This has put significant pressure on the company. Additionally, there is increasing uncertainty regarding Crestor due to the entry of generic versions of Pfizer’s (PFE) Lipitor in Nov 2011. The company’s much hyped antiplatelet drug, Brilinta’s performance has remained lukewarm.

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). Another pharma stock that looks attractive is Osiris Therapeutics, Inc. (OSIR). Osiris is a Zacks Rank #1 stock.

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