AstraZeneca's latest restructuring spurs debate over outsourcing R&D

AstraZeneca's ($AZN) big news last week that it will shed another 7,300 jobs helped underscore one of the big outsourcing trends in the biopharma industry. Weaker players hit by generic competition are eliminating large R&D operations and concentrating their remaining budget in global research hubs like Boston. And AstraZeneca's plan to create a "virtual" research operation for a greatly reduced initiative in neuroscience is taking that trend to a logical extreme.

Reporting in The Wall Street Journal yesterday, Sten Stovall considered the R&D conundrum by comparing AstraZeneca's decision to ax 2,200 R&D workers in favor of the outsourcing model with GlaxoSmithKline's ($GSK) decision to reorganize its in-house work around the so-called Drug Performance Units. Now analysts say AstraZeneca will have to devote more of its budget to acquire late-stage products in the hopes it can get lucky and land a much-needed blockbuster. GSK, meanwhile, has lined up some 30 in-house programs that can deliver new revenue.

Small biotechs have perfected the virtual approach to drug development in recent years. Many Big Pharma operations, like Sanofi ($SNY), have responded by insisting its scientists take to the field, so to speak, and create new units that can collaborate directly with academic research scientists. That new open R&D ecosystem promises to fundamentally change the way drugs are discovered and advanced into the clinic. It certainly requires fewer resources.

AstraZeneca's Martin Mackay told analysts the new R&D effort allows for a "lower and more flexible cost base" and "access the best science available," according to the Journal.

But given the timelines required for any successful new effort on drug research, we won't see any proof of whether it actually works for a number of years.

- get the story from the WSJ on the outsourcing debate
- here's the report from the WSJ on the restructuring news