AstraZeneca saw revenue fall by 11% in the first quarter of 2012 after generic competition hit the company hard.

Sales amounted to $7.349 billion after several key brands lost exclusivity, which accounted for an 8% decline in revenue. Reported operating profit, profit before tax and earnings per share were also down by more than a third.

David Brennan, Chief Executive Officer, says the “anticipated impact” of generic competition “has made for a difficult start to the year”.

Revenues were down in the US (12%), Western Europe (21%) and in Established Rest of the World (6%) and Emerging Rest of the World (1%); however, emerging markets did see a 1% increase.

In the US, revenue was down from $3.3bn in Q1 2011 to $2.9bn in the same period this year. Generic competition on Seroquel IR accounted for $223 million of the $384m loss. Growth was recorded for Onglyza, Seroquel XR and Symbicort. However, this was offset by a decline in sales of Nexium and a loss of protection for Toprol-XL, Arimidex and Merrem.

Sales were down further in Western Europe where generic competition for Nexium, Arimidex and Merrem accounted for nearly 60% of lost revenue. In Japan sales were down by a tenth, and in Canada by 8%.

An increase in revenue in China by 13% helped sales increase in emerging markets as AZ again faced the loss of patent protection for Crestor and Seroquel in Brazil and government interventions in price in Turkey.

AZ also lost $702 million in restructuring costs in Q1 as it undertook the third phase of the $2.1bn efficiency programme it revealed in February 2012. It anticipates that total restructuring costs will be absorbed this year in order to save $1.6bn by the end of 2014.

The disappointing results were published on the same day that David Brennan revealed plans to retire from his position on 1 June 2012.

Ana Nicholls, Analyst, Economist Intelligence Unit, says his decision to stand down is no real surprise. “Investors have long been dissatisfied with AstraZeneca’s efforts to cope with these challenges, despite its efforts to keep them onside,” she commented.

“Managers are aware they also need to step up their expansion into emerging markets that hold better growth prospects. Given this, and AstraZeneca’s fairly health cash pile, the company is under pressure to make acquisitions to help sustain growth – it is Mr Brennan’s failure to do this that has forced him into retirement.”

As a result of the Q1 figures, AstraZeneca readjusted its 2012 outlook and expects the decline in revenue will be in the range of the low to mid-teens.

The ABPI has played down any worries over the state of the UK pharmaceutical industry after AstraZeneca’s restructuring plans put jobs at risk at two plants in Cheshire.

Approximately 7,300 jobs will be axed by AZ in the next three years with the GMB Union predicting that 250-300 jobs will go from the company’s R&D site at Alderley Park, Cheshire.

However, the ABPI says the UK remains a “global leader in science and healthcare and huge levels of R&D investment continue to take place”, and insisted the job cuts were not a reflection of the UK market.

In a statement, the Association says that AZ has a “long history” of investment as a big employer and contributor to the economy and it expects this to continue.

It realises that the “industry has modernised in recent years” to a more integrated partnership model with companies of all sizes working together – along with an increase in joint working between pharma and the NHS.

The Government has supported the UK industry, the statement said, and continues to “encourage investment and growth in the life sciences sector”. But the ABPI has called on the Government to continue this approach and focus on promises previously made.

The Association says it needs to continue to “do all it can” to incentivise investment. Recent initiatives such as the patent box have been positive, the statement said, but the Government “must follow through on the promises made in the Autumn Package”.

“The Government will need to reward innovation by designing a pricing scheme that values innovation and encourages R&D to take place in the UK,” said the statement.

AstraZeneca saw revenue fall by around $3bn in 2011 after it faced global pricing restrictions from governments and generic competition.

Revenue was down 2% in constant exchange rates (CER) to $33.5bn after sales in the US fell by 2% and in Western Europe by 11%.

Despite the fall in revenue, David Brennan, AZ CEO, says the company’s “disciplined execution” of its strategy “delivered good performance” last year.

The company now expects to see reduced revenue in 2012 after the anticipated loss of exclusivity for Seroquel IR and Atacand in global markets, as well as for Crestor in Canada.

Sales in the US were down from $13.7bn in 2010 to $13.4bn last year after US healthcare reforms lowered income. This was despite growth in Crestor (+16%), the Seroquel franchise (+10%), Symbicort (17%) and Onglyza in the country.

In Western Europe, nearly a billion dollars was lost due to generic competition on Nexium, Armidex and Merrem. But losses were compensated by growth by Seroquel XR, Iressa, Faslodex, Crestor and Onglyza.

Emerging markets did show promise for the company as growth increased by 10% both in Q4 and for the full year. This was driven by mid-to-high teen growth in China, Russia and the Middle East/North Africa region. But generic erosion on Crestor and Seroquel IR in Brazil did see revenue fall in the country.

Sales of AZ’s gastrointestinal medicines were down 11% to $5.5bn with revenue also down on its oncology products by 12% to $3.7bn. But cardiovascular treatments, led by $6.6bn sales of Crestor, and its neuroscience drugs, helped by $5.8bn sales of the Seroquel brand, both recorded growth of 5% last year.

“While the further expected losses of market exclusivity make for a challenging 2012 outlook, we remain committed to a long-term, focused, R&D based strategy, and today we have announced further steps to drive productivity in all areas to improve returns on our investment in innovation,” said David Brennan.

In conjunction with its 2011 results, AstraZeneca also revealed new restructuring plans to its sales, general and administrative, research and development and operations divisions which will see 7,300 positions removed from its workforce by 2014. The move, which is hoped will generate annual savings of $1.6bn, is expected to cost the company an outlay of $2.1bn. Read the full job cuts story here.

AstraZeneca will reduce its workforce by approximately 7,300 positions in new restructuring plans it hopes will strengthen the company’s commercial, operations and R&D capabilities.

Around 3,750 jobs will be axed from its sales, general and administrative division, 2,200 jobs from its R&D unit and a further 1,350 positions from its operations functions.

David Brennan, CEO, says the “initiatives” should be viewed in a “strategic context” as the company faces various challenges in a “rapidly changing healthcare environment”.

The new plans are hoped to deliver annual savings of around $1.6bn by the end of 2014 at a cost of $2.1bn.

Within its sales, general and admin category, AZ aims to continue to drive efficiencies, reduce non-customer facing support groups and introduce new measures to deal with the needs of customers.

It has already reduced its sales and marketing regions from five to three and now aims to cluster smaller countries together to “optimise resources, increase shared services and reduce costs”, it says. Digital technology and the use of call centres for sales and medical advice will be introduced as AZ uses new customer channels to provide “innovative, high quality services”, it says, at lower costs.

Research and development plans unveiled in January 2010 will now be accelerated in a move to create a “simpler and more innovative” division with a lower and more flexible cost base. A focus has been placed in the neuroscience therapy area with AZ believing a combination of internal expertise and external science will help realise unmet need. As a result, the company will create ‘virtual’ neuroscience Innovative Medicines unit (iMed) made up of a small team of around 40 to 50 AstraZeneca scientists.

These teams will be based in the UK at Cambridge and in the US in Boston but will see sites in Södertälje in Sweden and Montreal in Canada end R&D activity. The Canadian plant will also close completely.

Finally, further job cuts will be made to the company’s operations unit in a move to improve the “efficiency and effectiveness” of its supply chain, the company says. It will also outsource certain manufacturing activities.

The company says it aware of the impact the job losses will have on its employees, but restructuring is needed after its 2011 financial results showed a loss in revenue of $3bn after global pricing restrictions and generic competition.

“AstraZeneca remains fully committed to our long-term, focused, innovation-driven biopharmaceutical strategy,” said David Brennan. “Since 2007, when we announced our first major restructuring programme, we have taken decisive steps to improve returns on investment, recognising that this demands concerted, enterprise-wide action.

“We are acutely aware that these decisions will affect many employees and we will strive to support our people as we implement these changes.”