AZ now has a team: Mene Pangalos, Bahija Jallal and Briggs Morrison (left to right)

Under new management - AstraZeneca
2012: $5.24 billion
2011: $5.52 billion
Change: Down 5%
Percentage of sales: 18.8%
R&D team: Mene Pangalos, Bahija Jallal and Briggs Morrison

AstraZeneca ($AZN) started off 2012 the same way it had ended 2011: reporting failures. Early in the year the FDA rejected dapagliflozin (Forxiga), partnered with Bristol-Myers Squibb ($BMY), concerned about the potential risks inherent in the new SGLT2 approach to treating diabetes. The company went on to win a European approval for the therapy, marking a high point in an otherwise grim and dispiriting era.

Under CEO David Brennan, AstraZeneca became known as the Big Pharma company that couldn't do R&D well. One after another program disintegrated with bad data, triggering a fresh round of restructuring in R&D. But Brennan got the boot, after making the key mistake of shrugging off investors' growing discontent. And then R&D chief Martin Mackay vowed to go on a deal spree to right the listing ship, only to get ousted by new CEO Pascal Soriot at the beginning of 2013.

AstraZeneca's track record has been blighted by the consistent collapse of its center-ring collaborations. The pact with Targacept on the antidepressant TC-5214 was begun with enormous enthusiasm but ended with complete failure. Its $1.25 billion deal with Rigel for the oral rheumatoid arthritis drug fostamatanib was similarly launched with great fanfare in 2010 but ended up failing against Humira in a Phase IIb. That drug is in late-stage studies now, but even an approval would lead to a tough market showdown against the newly approved Xeljanz and Humira.

The company's gross R&D expenses for last year include $791 million in one-time restructuring costs, pointing the company to a sharp drop in research costs in 2013, with a shrinking "core" budget. That core number was down 11% this past year, despite a string of new collaboration deals. And AZ has been touting the fact that after a second round of restructuring in 2012, the company will have more money to spend on biologics.

Now the global R&D operation will be divvied among three key players: Mene Pangalos, MedImmune's Bahija Jallal and Briggs Morrison. They will each be given one of three tasks: head of discovery and early development of small molecules, running early-stage work on biologics (MedImmune's role), and late-stage development. 

One of Soriot's first acts as CEO was to stop the company's stock buybacks, which had been propping up the stock price. Analysts took that as a signal that AstraZeneca may soon pull off a sizable M&A play, inevitably citing Shire ($SHPGY) as a prime potential target. Soriot, though, has been taking some time to try to put his house in order. And now he's promising to reveal all--or at least more--at an upcoming strategy review scheduled for March 21.

One thing is certain: Time is of the essence. The recent financial performance has been bad enough, but its big blockbuster Nexium loses patent protection next year and Crestor follows in 2016. AstraZeneca's ability to survive in the top 10 is on the line.

For more:
After FDA rejection, Bristol-AstraZeneca team wins EC OK for diabetes drug dapagliflozin
New chief halts AZ buybacks to review strategy
What will new CEO Soriot do now to fix AstraZeneca?
AstraZeneca's R&D chief vows to keep 'pedal to the metal'
Final PhIII results wipe out AstraZeneca, Targacept depression drug


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