Everyone is familiar with the problems that can arise from installing new technology. But AstraZeneca ($AZN) is having more than a few problems with a new IT system that is supposed to be making a plant in Sweden more efficient but instead interrupted production and undermined its expansion in the most promising markets.
Of a 21% decline in revenue for its most recent quarter, 2% is attributable to the production backups at the plant in Södartälje. Most of the decline is because of patent losses and generic competition, but the $33.6 billion company says it expects the IT issue will whack 1% off revenue for the year.
CEO Simon Lowth told analysts during a conference call that "... supply issues reduced our growth rate in emerging markets from around 8% down to 1%." He said production is now ramped up beyond normal levels to fill back orders and ongoing demand but estimated "the revenue impact for the full year to be around 1%."
Spokesman Thomas Hushen tells FiercePharmaManufacturing that the same IT system installed at the plant in Södartälje is going into all of its new plants and is working fine at plants in the U.S. and Asia. He didn't say exactly what went wrong but that the new "technology platform" replaces about 40 different outdated IT systems at the Södartälje facility that "were becoming unstable due to age and it was necessary to replace them with an updated IT system."
The products most affected by backups at the plant are asthma and chronic obstructive pulmonary disease (COPD) drugs Symbicort and Turbuhaler, gastrointestinal treatment Nexium, and blood pressure medicine Atacand, Executive VP Tony Zook told analysts.
That emerging markets were hardest hit has to be particularly disappointing for executives and investors, and a drag on morale. As Zook reminded in the conference call, that is where AstraZeneca is putting its attention. It has been whacking jobs in "mature markets" while adding them in emerging markets.
- see AstraZeneca's earnings release
- read the earnings call transcript