AstraZeneca Looks to New Leadership As Drug Patent Expiration Hurts Sales

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(Image: Stock.xchng)
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BUSINESS

  • Pascal Soriot, AstraZeneca’s new leader, expected to combat decline in sales and pre-tax profit caused by expiration of drug patents
  • Most critical losses through to 2016 include best-selling drugs Crestor, Seroquel and Nexium
  • Recovery plan includes annual strategy review, outsourcing of product development and acquisitions

Global pharmaceutical company AstraZeneca is looking to the leadership of new chief executive Pascal Soriot to counter the company’s decline in revenue and pre-tax profits as reported in the third quarter.

Poor financial results, including a 56% decrease in net profit and a 19% decrease in sales, largely reflect the expiration of significant drug patents and entrance of cheaper generic brands into the market.

Among the drugs with patents expiring by 2015 are Seroquel, the anti-psychotic used to treat schizophrenia, and Nexium, used for ulcers and heartburn. Together, Seroquel and Nexium are the company’s second-and third-best-selling drugs, respectively. They also bring in more than 40% of total sales – a number totaling over $10 billion last year.

Seroquel’s US patent protection lapsed in March, while Nexium’s US patent will expire in 2014.

AstraZeneca will take another hit when its best-selling drug Crestor, used to combat cholesterol, loses its US patent protection in 2016, particularly given the company’s noted difficulty producing new medications to replace drugs losing their patent.

AstraZeneca’s Strategic Recovery Plan

Soriot, formerly of rival Swiss pharmaceutical company Roche, was appointed in October and began to implement a strategic plan for recovery immediately.

The new chief executive plans to conduct an extensive annual strategy review, currently underway. He will also continue the company’s efforts to find small-to-medium acquisitions and licensing deals to improve its product offering.

Among recent efforts, in April 2012, AstraZeneca purchased Ardea Biosciences Inc. for $1.1 billion, its first acquisition over $1 billion since a 2007 takeover of MedImmune Inc. for $14.7 billion. Further, the company announced that it would pay Bristol-Myers Squibb Co. nearly $3.5 billion to co-develop the diabetes treatment drugs of Amylin Pharmaceuticals – a Brisol-Myers acquisition. Finally, a recent deal with Pfizer Inc. for rights to Nexium’s over-the-counter sales brought AstraZeneca $250 million upfront.

The company is also focused on cutting costs to boost profitability, and has announced that 7,300 jobs will be cut by 2014.

Regardless of its recent losses, AstraZeneca’s profit did not fall as much as predicted by analysts, and its financial forecast remains stable thanks to its moderate share buyback program.

More financial details, including a 2013 forecast, will be revealed following the present annual strategy review.

Key Statistics - World Pharmaceutical Industry (source: MarketLine)

  • In 2010, the world pharmaceutical market reached nearly $733 billion, marking an over 3.5% increase.
  • The pharmaceutical market worldwide is expected to be valued at over $981 billion by 2015, having increased by nearly 34% since 2010.
  • Nearly 45% of the value of the global pharmaceutical market comes from the Americas.
  • With a near 10% share of industry value, Pfizer is the world pharmaceutical leader.

By Christelle Agboka for
Christelle Agboka is a freelance journalist based in Kingston, Ontario, who covers business and economy news.

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