It's been a tough week for Big Pharma's rank-and-file. First, Pfizer said it would lay off 8,000 folks, and up to 20,000 if its Wyeth merger goes through. Now, AstraZeneca is doubling the size of its cost-cutting plan--which means another 7,400 or so jobs face the ax by 2013.
AstraZeneca aims to save almost $3 billion a year by that time, with most of the savings coming by 2010. So rather than the 7,600 jobs initially slated for extinction, 15,000 is the new goal. No details yet on just where those cuts might focus, though with pharma running full-bore on sales-and-marketing layoffs, we're betting on a good chunk of reps lost among those vanished jobs.
Take a look at AZ's newest numbers, and you can see why CEO David Brennan (photo) has slipped into defensive mode. (That's where cost cuts and layoffs live, don't you know. Retrenchment City.) Sales for 2008 rose a mere 3 percent to $31.6 billion in constant currency terms, but core operating profit grew 9 percent to $10.9 billion because of the company's cost-cutting moves. The fourth quarter looked worse: operating profits of $1.9 billion, versus an expected $2.2 billion. And AstraZeneca expects 2009 sales to be essentially flat, sales-wise, so any new earnings growth will have to come from falling costs.
And then there's the bright spot: a 31 percent growth in China sales, 16 percent growth in emerging markets overall, to $4.2 billion. The restructuring plan will help divert some resources to those areas, in hopes of goosing them further upward.
"Market conditions have never been tougher," Brennan said. Nevertheless, the company managed to raise its dividend by 10 percent to $2.05 per share, in an attempt to calm skittish investors. Traders weren't placated, though; at least one firm advised clients to sell. "The EPS guidance is disappointing," one told Hemscott, "and the lack of any sales growth forecast ... is a bit concerning."