2011 spending: $5.5 billion
2010 spending: $5.3 billion
Percentage of revenue: 16.3%
Like several other top 10 pharma companies, AstraZeneca ($AZN) saw its R&D expenses climb somewhat in 2011. But this year, as CEO David Brennan unveiled the annual results for 2011, he started with a new restructuring plan. And R&D is intended to bear some of the biggest cuts.
Hit with sliding profits and eviscerated by analysts for one of the weakest late-stage pipelines in the Big Pharma business, Brennan had to do something significant. Of more than 7,000 pink slips being readied, 2,200 were being reserved for R&D as the company moved to shutter R&D facilities in Soedertaelje in Sweden and Montreal. Neuroscience, once a key feature in the pipeline, is being scaled way back, with plans to field a "virtual" team in key hubs.
AstraZeneca became the poster child for the R&D quagmire when Forbes' Matthew Herper concluded that AstraZeneca had the worst ratio of R&D costs to approvals in the industry. For a company that went 6 years without a drug approval ahead of the 2009 OK for Onglyza, accumulated setbacks have reached a breaking point.
AstraZeneca, though, can't cut its way to a turnaround in R&D. That's going to take new programs and new technologies. It only began to address the issue with a licensing pact for a slate of Amgen antibodies. Research chief Martin Mackay was quick to follow up by telling Reuters' Ben Hirschler that more deals were coming. And indeed just weeks later, AstraZeneca acquired a late-stage gout drug with the $1.26 billion buyout of Ardea. The fact that AstraZeneca didn't bother to stick with its disease strategy, and quickly indicated that it wouldn't in the future, underscored just how crucial it is to move fast.
Nevertheless, AstraZeneca will find it hard to shake its legacy of failures. Just weeks ago the company was forced to wash its hands of a billion-dollar deal with Targacept ($TRGT) for a prospective depression drug that failed 4 out of 4 late-stage studies. And as criticism mounted, Brennan has been forced to adopt a defensive posture.
"I read and hear and see lots of things, but we're here trying to change policy, make good decisions and execute our strategy," the CEO told Bloomberg, vowing to stick to the game plan. "Maybe somebody sees something different, but spending more money does not have a linear increase in the number of returns you get from a research and development perspective."