Management at pharmaceutical giant AstraZeneca (AZN) has been fervent in its assurances that in 2017 the group will increase turnover by three-quarters and return to earnings growth. But in trying to reach that short-term goal the group's critics have argued it may have now sacrificed a few too many assets.
In 2016 it sold or partnered several of its 'non-core' drugs and now some jobs are now being cut. Last week the group announced it would move the finance department out of the UK and slim down the US commercial operations.
The market responded positively to the announcement that UK finance roles will be moved to Malaysia, Costa Rica and Poland, a strategy that forms part of the group's ongoing $1.1bn (£866m) cost-cutting drive. But we're unconvinced about the decision to cut back US commercial operations. Granted, the streamlining will lower general overheads in 2017, but the strength of its commercial franchise - something that is hard fought for by pharma companies - could be hit. "People are crucial to its effectiveness," said David Cox, healthcare analyst at Panmure Gordon, who is uninspired by Astra's cost-cutting scheme and worried about what it will do to the future of the business.
Last week the group also signed its 12th drug licensing deal of the year, this time with Eli Lilly (US:LLY) for an early-stage Alzheimer's drug. This came shortly after Lilly reported a high-profile final-stage clinical trial failure of its own drug aimed at tackling the disease. Such deals provide short-term financial benefits for Astra, which are booked as externalisation revenues. In 2015, the group reported just over $1bn of externalisation revenues, but this is expected to ramp up considerably in the current financial year.
Investors also welcomed positive news from Astra's drug development pipeline. The US Food and Drug Administration has accepted its biologics licence application for durvalumab in bladder cancer and given it priority status, meaning a decision for approval will be granted (or not) within six months.
Durvalumab has been widely regarded as one of Astra's biggest immuno-oncology hopes as it has the potential to be used to treat many different types of cancer. Prior to this announcement, the shares rose as much as 7 per cent, meaning trading in the American Depository Shares (ADS) was halted on Friday; perhaps hinting that the trial results had been leaked before the official announcement.
