"AstraZeneca's fortunes have sagged lately"

AstraZeneca's fortunes have sagged lately

It has been hurt by competition from generics, failed heart drug
By Meredith Cohn
SUN REPORTER

Originally published April 24, 2007

AstraZeneca PLC, formed from two companies in 1999, has grown into one of the world's largest pharmaceutical companies with 66,000 employees and $26.5 billion in sales last year.

Based in London, it has a stable of top-selling drugs, including Crestor to reduce cholesterol, Nexium for acid reflux disease and Seroquel for treating schizophrenia.

But not everything is going the company's way these days.

Faced with increased competition from generic drugs, it said in February that it would lay off 3,000 workers. A promising heart drug it was developing with another company didn't pan out. And the company recently fired a regional sales director after he made impolitic comments that brought the company's sales practices into question for the second time in four years.

Yesterday, the company sought to boost its fortunes - and its bank of drugs in the pipeline - with the purchase of MedImmune Inc., the Gaithersburg-based maker of FluMist.

"This is very important and strategic for us," said Emily Denney, a company spokeswoman. "More products means more medicines we can deliver to our patients."

Michael J. Werner, president of the Werner Group, a biotechnology consulting firm in Washington, said MedImmune's vaccine business could be of particular benefit to AstraZeneca.

MedImmune has been developing pandemic and seasonal flu vaccines. And it gets royalties for developing technology used to make vaccines such as Merck's Gardasil for the human papillomavirus, which causes cervical cancer.

"This is an opportunity for them to get into the vaccine space and to do it with a market leader," Werner said.

Astra AB of Sweden and Zeneca Group PLC of Britain joined eight years ago to form AstraZeneca, which has its U.S. headquarters in Wilmington, Del., and has 12,000 employees there and in Waltham, Mass.

Peter Rost, a former Pfizer Inc. marketing vice president who is now an author and blogger on industry practices, said AstraZeneca's size helps explain why it needs to buy another drug-development company.

"It's very big now, and it's hard to discover a new drug that can significantly increase sales," Rost said. "When you make that much money it's hard for any one drug to have a significant impact. It's a Catch-22. ... It's much easier to grow when you're small."

AstraZeneca has had to overcome other problems.

In 2003, the company agreed to pay $355 million to resolve federal criminal and civil charges stemming from pricing and marketing practices concerning its prostate cancer drug Zoladex, according to the U.S. Justice Department.

The company also agreed to sign a corporate integrity agreement. That brings the company an extra layer of scrutiny from the government, Rost said.

AstraZeneca acted quickly when Rost's Web site posted provocative comments that a regional sales director, Michael Zubillaga, had made in a recent internal newsletter. Zubillaga said of doctors' offices: "There is a big bucket of money sitting in every office. Every time you go in, you reach your hand in the bucket and grab a handful."

AstraZeneca fired Zubillaga.

"It was one person, and when we became aware of the comments, which were not in line with the purposes of our company, we moved to dismiss him," spokeswoman Denney said.

meredith.cohn@baltsun.com
Sun reporter Tricia Bishop contributed to this article.