Strong medicine for AstraZeneca as 1,200 UK jobs go

The UK's second-largest drugs firm AstraZeneca is to close two R&D centres with the loss of 1,200 jobs.

Last Updated: 22 Mar 2012

The closure of AZ’s Loughborough facility will account for the majority of the cuts, while a second smaller lab in Cambridge is also facing the chop. The Loughborough site is currently home to AZ’s efforts to find new drugs for respiratory diseases like asthma and bronchitis, and its closure marks a substantial contraction of the UK’s overall pharmaceutical R’n’D footprint.

The move is part of a wider global reorganisation - both within AZ and across the pharmaceutical sector as a whole - which will see AstraZeneca lose something like 8,000 jobs in total over the next five years. It’s an urgent task for a firm that has been particularly badly hit by one of the industry’s worst bugbears, the so-called ‘patent-cliff’ – the sudden and enormous drop in revenues that occurs when the patent on a blockbuster drug expires.

But although the end of patents on big earners like breast cancer treatment Arimidex and asthma drug Pulmicort has knocked AZ, the real problem is that its pipeline of replacement new treatments is running dry. It’s this fundamental lack of R’n’D productivity that AZ boss David Brennan is trying to address.

Sceptics might say that slashing R’n’D spend is a funny way of going about it. But as the industry changes, and investors seek steadier and less boom’n’bust returns, enthusiasm for the drug industry’s traditional reliance on huge and expensive in-house research teams is waning.

Bosses and shareholders have woken up to the fact that partnerships and licensing deals allow Big Pharma to offload the risk of finding the next big thing to small, highly focussed biotech groups, while still sharing a substantial chunk of the upside of any molecular golden bullets which do come along. Like the deal which AZ signed recently with Rigel to develop an arthritis treatment, at much lower cost that had it done so alone.

Firms are also looking to pursue the ‘low-hanging fruit’ – those therapy areas which seem most likely to yield results in a shorter timeframe. So we can expect to see a good deal more of this kind of rationalisation across the sector. Similar moves by GSK have resulted in 380 UK R’n’D job losses recently, with more likely to follow.

On the operational level, this is all perfectly sound commercial decision making. But there is a wider point in play here - knowledge industries like the pharma and biotech sectors rely on countries having a large and vibrant skills base from which they can pick their talent. If the size of private sector R’n’D keeps shrinking, there’s a risk that critical mass will be lost and that a trickle of dis-investment then becomes a flood. Especially given that the public sector - in the shape of universities and higher education institutes – is likely to be too cash-strapped to make up the difference over the next few years…

In today's bulletin:

Confidence rises as services sector rebounds (just don't mention the pound)
ITV no longer on the blink as Adam Crozier era looms?
Strong medicine for AstraZeneca as 1,200 UK jobs go
Prudential looks East as UK shareholders baulk at AIG deal
Is new restaurant body really sustainable?


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