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AstraZeneca Business Case Analysis
Sergio Garcia, HimanshiNandu, Adriana Padhina, Janelle Thompson
Busi 599 Graduate Business Essentials
Michael Cole, Edward O’Connor
December 6, 2012
iii
Table of Contents
AstraZeneca Business Case............................................................................................................ 1
Executive Summary ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background .................................................................................................................................... 2
History ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Environmental Factors ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Model........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Quantification of Market Size and Share ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Operational Effectiveness ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Management Effectiveness........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Competitive Comparison (Direct and Indirect)........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Marketing & Sales Strategy......................................................................................................... 17 Key Market Segments – Target Market(s) ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Positioning ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Brand Strategy........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Marketing Mix Strategies ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Innovation Profile and Strategy........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Sales & Service Strategy ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Financial Analysis ....................................................................................................................... 21
Profitability, Liquidity, & Leverage Ratios ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 EBITDA, Income Statement, ROE ...................................................................Error! Bookmark not defined.
Current Assets/Current Liabilities ................................................................Error! Bookmark not defined. Sources of Capital..................................................................................................Error! Bookmark not defined.
Trends and Industry Comparisons ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Error! Bookmark not defined. Analysis of Financial Statements in Terms of Supporting the Case ..... Error! Bookmark not defined.
SWOT Analysis ............................................................................................................................ 26
Summary ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Strengths ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Sales growth of Crestor, Seroquel XR and Symbicort. .................................................................................. 27 Advancements in Biologics and Vaccines........................................................................................................... 27
Cost control efforts increasing operational efficiency. ................................................................................. 28
Maintains strong global presence .......................................................................................................................... 29 Weaknesses........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Expiring patents............................................................................................................................................................. 29
Regulatory requirements .......................................................................................................................................... 30
R & D productivity ........................................................................................................................................................ 30 Pricing Pressure............................................................................................................................................................. 30
Opportunities ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
iv
Advances in science and technology .................................................................................................................... 31
Further expansion in emerging markets ............................................................................................................ 32 Amgen collaboration for inflammation drugs .................................................................................................. 32 Acquisition of Ardea, which is a U.S. biotechnology company .................................................................. 33
Threats........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Generic Competition .................................................................................................................................................... 33 Illegal trade in products ............................................................................................................................................. 33 Patent litigation in respect of IP rights ................................................................................................................ 34
Economic, regulatory and political pressure .................................................................................................... 34 SWOT Conclusion ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Competitive Picture .......................................................................Error! Bookmark not defined.
Observation Explanation........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Error! Bookmark not defined. Recommendations ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Error! Bookmark not defined.
Financial Model ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Error! Bookmark not defined. Market Share Growth ..........................................................................................Error! Bookmark not defined. Revenue Growth ....................................................................................................Error! Bookmark not defined. Expense Projections.............................................................................................Error! Bookmark not defined.
Counter Argument ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Error! Bookmark not defined.
Conclusion ................................................................................................................................... 35
Appendix………………………………………………………………………………………..25
1
AstraZeneca Executive Summary
Our case is based on the pharmaceutical company Astra
Zeneca. AstraZeneca is active worldwide and employs
over 65,000 people in over 100 countries and is the
second largest pharmaceutical company in the United
Kingdom. AstraZeneca’s medicines cover several fields
including cardiovascular, gastrointestinal, infection,
neuroscience, oncology and respiratory. In this case study, we will demonstrate that in
reality Astra Zeneca is a stable company and heading towards the right path but it is
market value undervalued in aspects of Marketing/ Finance in comparison to its
competitors. We shall investigate the true insight of why this company has been
undervalued in these areas. We will demonstrate their strengths and weaknesses and their
insight of their plan for the future. AZN has faced obstacles such as product development
life cycle. Drug development is a highly competitive activity and every day saved in getting
a new branded drug to market can be measured in millions of dollars. Patents for
pharmaceuticals last between 20 and 25 years, depending on the country or region, but it
takes between eight and 12 years to bring a new drug to market. The shorter the p roduct
development time and clinical trial, the longer a company has to establish brand leadership
and generate revenue before a competitor can bring generic products to market. We will
dissect the financial statements within this domain and views how their current leaders,
2
such as managers help keep their sales up to par. Management will be looked at in a more
in depth view such as how they help bring the company to their vision and standards. AZN
has been establishing programs as well in foreign countries that has helped market their
products within those regions. This concludes us, AZN has all the essential tools to rise in
being within the top 5 pharmaceutical companies globally if they mend their weaknesses
and we have incorporated suggestions of how this can be done.
Background History
This major Pharmaceutical Company was originally two separate entities, which
were Astra AB and Zeneca. Astra AB was founded in 1913 by a group of doctors in
Sweden. The second company was Zeneca, which was founded on 1993 in Britain. In 1999,
both companies merged and became the company that we now know as AstraZeneca
plc. The merger between both companies was to provide long-term growth and bigger
shareholder value through Global power and reach in sales / marketing, stronger R &D
platform, and a greater financial strategy.
Environmental Factors
Pharmaceutical markets continue to grow as the population increases. As humans
continue to want to prolong their lives, the pharmaceutical industry continues to thrive.
The pharmaceutical industry continues to have a wide demographic for their markets,
where different diseases and chronic illnesses continue to trouble people and provides a
3
market for those who wish to medicate them. Although this demographic seems unflawed,
increased pricing pressures, pressure for industry returns on declining R&D productivity,
coupled with rising healthcare costs, pose major threats to the industry. Regulatory
constraints have increased from political pressure to and will continue to soar. The culture
of the industry is one of a competitive nature and forcing companies to diversify by
acquiring generic businesses or consumer portfolios. R&D productivity improvement
remains a top priority among the industry as well as global expansio n, industry
consolidation via mergers and acquisitions, and the pursuit of operational efficiency.
Business Model
Business Model- Strategy and Performance
AstraZeneca’s business model is driven by their strategy and is based on using the
best innovative science & technology to invent or acquire, produce and distribute
innovative, patent-protected medicines that make a meaningful difference to people’s
health around the world. They also commercialize medicines that do not have patent
protection where we can obtain prices that reflect the quality and value of our brand. To
pursue their strategy, they invest in those projects and products where they believe
medical innovation or brand equity will enable us to make acceptable levels of return for
their shareholders.
The Life cycle of a medicine, the process they use to develop new drugs. It starts
with the identification of an unmet medical need and market opportunity and the search
4
for a potential medicine, and moves through clinical trials and drug development,
regulatory submission, a medicine’s launch and management of its life-cycle.
An inherent element of their business model is the creation and protection of our
underlying IP (Intellectual Property) assets. As the diagram below shows, the development
of a new medicine requires a significant investment of resources over a period of 10 or
more years before product launch, with no guarantee of success. For this to be a viable
investment, the resulting new medicine must be safeguarded from being copied with a
reasonable amount of certainty for a reasonable period of time. This allows time to
generate the revenue they need to reinvest in new pharmaceutical innovation. In addition
to establishing and defending their IP assets and, as illustrated in the diagram, they can also
influence the return they make on their investment by improving their:
R&D productivity: “We are focused on delivering innovative and valued medicines”
Their R&D organization continues to evolve to meet the challenges facing our
industry by investing in high quality science and harnessing the innovation of their people.
They are continuously improving their understanding of mechanisms and targets that will
become the Foundation for developing and delivering tomorrow’s new medicines. These
efforts are undertaken with the highest ethical standards, as they are committed to
delivering innovative medicines responsibly. They continue to prioritize their resources
and focus discovery activities on those diseases within our existing therapy areas where
they believe there is the greatest potential to meet patient need through the application of
novel science. This continual process of prioritization is designed to ensure that the
5
projects they have in their pipeline constitute the programs, which they believe are most
likely to deliver technical and commercial success.
Sales and marketing effectiveness:
Their global sales and marketing organization is active in over 100 countries and, at the
end of 2011 comprised approximately 32,300 employees. As well as building on their
leading positions in the US and Other Established Markets, they continue to increase their
strength in Emerging Markets including China, Brazil, Mexico and Russia.
Fig. 1 Business Model – AstraZeneca Annual Report 2011
Operational efficiency
6
A key goal for their planning process is to ensure that they sustain the cycle of successful
innovation and, as a result, continue to refresh their portfolio of patented products and so
generate value for shareholders.
They seek to maximize the efficiency of our supply chain through a culture of continuous
improvement built on the commitment and engagement of their employees and a
commitment to minimize the impact on the environment. They focus on what adds value to
their customers and patients, as well as waste elimination. This program has delivered
significant benefits in recent years, including reduced manufacturing lead times and lowe r
average stock levels, both of which improve their ability to respond to customer needs and
reduce inventory cost. All improvements are designed to ensure they maintain product
quality, safety and customer service.
Quantification of Market Size and Share
The pharmaceutical industry remains highly competitive. Most of AstraZeneca
competitors are other large research-based pharmaceutical companies such as Pfizer Inc.,
Johnson & Johnson, Amgen Inc., and Genentech, Inc. All of these pharmaceutical companies
develop and sell innovative, patent-protected prescription medicines and vaccines, as well
as smaller biotechnology and vaccine companies, and companies that produce generic
medicines. While all the companies are confronting similar challenges, strategically these
challenges are being met in different ways.
The definition of fragmented market is when a company uses different suppliers and
component manufacturers in the production of a good. Fragmentation is the results that
lead to different companies producing component parts and then the complete finished
7
good assembled elsewhere. AstraZeneca would not be able to secure their success if they
did not have a good relationship with those whom they do business with. Global External
Interactions Policy was launched in April 2011, which provides a single, common,
principlebased approach to all our interactions worldwide with public officials, healthcare
professionals and community organizations.
Global orientation
AstraZeneca future success required them to develop global strategies to commercialize
our products effectively. These global strategies needed to be tailored in both mature and
emerging markets. As part of that drive, we announced our decision to invest $200 million
in a manufacturing facility in China and our agreement to acquire a Chinese company that
will give us access to a portfolio of medicines used to treat infections. In Russia, we
invested $150 million in a manufacturing plant and announced plans to establish a new
predictive science center. We are also committed to playing our part in the global challenge
of providing sustainable access to healthcare for all those who need it. Our strategy
recognizes the complexities surrounding the issue, which range from the affordability of
medicines to the availability of healthcare systems and the resources to make them
effective.
Operational Effectiveness
Former CEO David Brennan’s review in the 2011 annual report outlined the goals
and methods for streamlining the company’s operational efficiency noting several steps
such as a new production plant in China, which “uses Lean production principles from the
outset”, reductions in workforce across the organization, and R&D site consolidation. In
8
the annual report it goes on to discuss that the “Lean production business improvement
tools” have been implemented to the entire supply chain and throughout the organization
including employees, products and equipment, and has resulted in quality improvement,
“lead times and overall equipment effectiveness”. Lean is used by organizations to reduce
waste while increasing customer value as stated on the Lean.org website. The plant in
China has expanded the accessibility to AstraZeneca’s products for urban and rural
communities to accommodate the rising local demand as explained in the 2011 annual
report. Global supply chain experts are being utilized to provide cross-functional support
through the organization and there was an October launch of the Supply Chain Academy,
which provides online internal training to solidify and escalate the improvements
throughout the supply chain. There is also a leadership program to contribute to the goal
of an efficient supply chain. The identification of failed processes are being sought out to
create methods to counteract these vulnerabilities. 1400 positions within the R&D
department have been reduced and there are also other reductions in supply &
manufacturing, support functions, and the sales and marketing workforce as well as the
closure of several facilities this year and more in the coming year.AstraZeneca has also sold
Astra Tech, which specializes in “dental and healthcare (urological and surgical) products”,
for 1.8 billion in cash allowing them to retain focus on their core therapy areas of cancer,
cardiovascular, gastrointestinal, infection, neuroscience and respiratory and inflammation.
Management Effectiveness
AstraZeneca wants their employees to feel positive and enthusiastic about what
they are doing for the company. They set a clear sense of purpose, which creates confidence
9
in their employees to meet the challenges of the pharmaceutical industry. Management
provides their employees with effective leadership, clear target, good communication, as
well as excellent learning and development opportunities. Within a performance culture
they create healthy, safe and energizing workplaces. AstraZeneca values diversity and the
success of employees that depend on personal merit and performance.
Setting the performance targets
Key priorities of AstraZeneca’s employees are to continued development of their
performance culture across the organization. Strengthening their focus on setting high
quality objectives aligned with the company’s business strategy. Performance at all levels
of the organization delivers value to the company. The AstraZeneca Board is responsible
for setting high-level strategic objectives and monitoring employee’s performance against
these. AstraZeneca mangers have a responsibility of working with their employees to
develop individual and team performance targets; they ensure that employee’s understand
how they contribute to overall business objectives.
Developing global talent and capabilities
AstraZeneca provides a range of learning and development (L&D), they want to
encourage and support their employees in achieving their full potential. These programs
are designed to build the capabilities and encourage the behaviors needed to deliver our
business strategy. The company has also implemented a global approach, supported by the
creation of our global talent and development organization, to ensure that high standards
of L&D practice are applied across the organization.
10
Diversity and inclusion
Although promoting diversity is not a new commitment for AstraZeneca, nut to
make sure that there is diversity it is represented in leadership, workforce and companies
thinking. Diverse cultures, backgrounds, skills and experience of our global workforce
bring great creative strength and energy to the company and have a critical role to play in
achieving strategic objectives. The goal of a 25% increase in sales the year of 2014 coming
from emerging markets, including China, Brazil, Russia and India. While working alongside
the companies already established markets AstraZeneca continues to grow the business in
these emerging countries to increase diverse range of stakeholders worldwide.
AstraZeneca perspectives of their stakeholders are central to how they do business
and understanding the different medicine needs that society values. It is important that
diversity of the communities that AstraZeneca serves is reflected in their workforce and
their leadership teams, locally and globally. AstraZeneca’s inclusive culture has employee’s
diverse talents as a critical aspect to attracting and retaining the best employees to take the
business forward.
Shaping our priorities
AstraZeneca is a company that operates in over 100 different countries so to define
their global framework around the world can be challenge. Established in 2010 and
chaired by our CEO AstraZeneca has a global steering group of senior leaders. This group
has supported a more actively inclusive culture, with the focus on driving change in key
areas identified; leadership and management capability, transparency in talent
management and career progression, and the challenges of work-life balance. Leadership
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and management capability led by a VP from the global marketing and sales organization
and is focused on building awareness of the business value of diversity, and the impact of
leadership behavior on creating an inclusive culture. The group works to integrate
diversity and inclusion at levels within leadership and management culture. Leadership
and management development programmers support and empower people in
understanding and leading the way in driving our diversity ambitions. Transparency in
talent management and career progression led by our Head of Clinical Development
focuses on retaining and attracting the best talent. This group creates environments where
ability is recognized, rewarded and encouraged to grow and where processes are
transparent and behaviors irreproachable. This program works with diversity at lower
levels; it identifies talented individuals earlier in their careers. This help the employees
better their development, build more diverse talent pipeline and enhance capabilities in
strategic geographies. This gets tracked by senior leaders to provide the company with
diverse talent pools. In 2012 AstraZeneca created a mentoring program which brought
together junior employees and senior leader. This opens an accelerated developing plan for
junior talent, showing positive leadership behaviors and encouraging an inclusive open
culture. The third work group is led by our President, AstraZeneca US and CEO North
America focuses on helping to create a climate, culture and working environment where
employees feel supported in managing the demands of work and personal life. In 2010
global employee survey showed that work and life balance as an area that needed
improvement. This survey gave the senior leaders a good insight into the issues expressed
by an employee perspective. With this in mine in 2011 AstraZeneca developed a new set of
global work/life balance principles. This was expressed to all employees by the CEO to
12
reinforce this throughout the company. These principles allowed business leaders now to
use global principles to develop solutions locally, in line with local laws, practice, custom
and culture.
Global Principles to support work-life balance
AstraZeneca does not expect employees to work excessive hours on a regular basis.
We encourage ongoing dialogue and review of work expectations, including scope and
timelines with an emphasis on prioritizing and letting go of lower value work.
We believe good health and wellbeing are fundamental to the ongoing success of
AstraZeneca and therefore encourage managers and employees to work together to
create flexible solutions, to meet business goals while not interfering with time for
family and friends, community activities, exercise or sleep.
We encourage the use of technology to create solutions that are viable alternatives to
face-to-face meetings that require travel.
Engagement and dialogue
In achieving AstraZeneca’s goals they believe in open lines of communication. This is
critical in helping employee’s to engage with senior leaders so they understand their roles
and work well with the company’s business strategy. AstraZeneca has a variety of
communications styles: local leaders and managers hold regular meeting with their teams,
as well as Internet, videoconference and yammer (social media tool). In addition,
AstraZeneca’s code of conduct outlines the procedures for employees to raise integrity
concerns, including a confidential helpline.
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Global employee survey
AstraZeneca also focuses on their annual global employee survey called (FOCUS).
This survey allows the company to track employee opinions and measure levels of
engagement, the effectiveness of our communications and other areas critical to our
business performance. Alongside of an external specialist these surveys are conducted
anonymously. The results are analyzed and communicated back to the employees. The
uses of these surveys are to provide valuable insights for business leaders and managers
about what we are doing well and where improvements need to be made. These insights
inform our strategic planning across the business AstraZeneca stated that:
91% of our people participated in our 2011 survey – the highest participation to date,
reflecting continued confidence in this feedback mechanism.
After the 1% point reduction in 2010, we were pleased to see a 1% increase in the
employee engagement score in 2011. Scores also increased in two other areas targeted
for improvement following the 2010 survey: leadership and work-life balance, both up
by 2%.
While some of these results are encouraging, the survey for 2011 showed that there
is a further improvement in engagement and leadership categories. The surveys also
statedthat the company needs to maintain the momentum it has built across the business
in the area of work-life balance and communication. With this issue being highlighted in the
survey AstraZeneca during the year 2011 made their senior executive team (SET) a total of
over 120 people to make personal appearances at company sites across the four continents
in an effort to create better communication. Feedback after the meetings showed that
14
people welcomed the opportunity to interact with SET members and understand better the
role everyone can play in driving future success.
Safety, health and wellbeing
AstraZeneca believes that a safety, healthy and energizing working energizing
working environment benefits employees as much as it benefits the business. If the
employees are happy and enjoy their work as well as their work environment it
contributes to AstraZeneca’s success.
AstraZeneca’s stated that they are committed to continuously promote health and
wellbeing for all of their employees. Listed below are some of the company’s core
considerations to continue this within the company:
Ensure that safety, health and wellbeing considerations are integrated across all our
activities.
Identify risks and ensure that these are understood and managed responsibly.
Help employees to understand their personal health risks and empower them to
manage these.
Set clear targets focused on continuous improvement.
AstraZeneca global Safety, Health and Environment (SHE) Policy describes what
expectations are wanted for thr employees and it also has global standards and procedures
which detail the minimum requirements in key risk areas.
In January 2011, AstraZeneca started a new SHE strategy and a complementary
Health and Wellbeing strategy for the targets in the upcoming years 2011-2015. These SHE
15
strategies worked with the business objectives and were made to make sure there is a
steady improvement in supporting safe, efficient and sustainable operations across the
company as AstraZeneca re-shape and grow our business.
Our safety, health and wellbeing targets for 2011-2015 are:
Fatalities: zero tolerance
Accidents and illnesses: 25% reduction in combined accident and illness rate
Driver safety: 40% reduction in collision rate
Health & wellbeing: 80% of sites offer our 6 essential health programmers or services
Managing change
AstraZeneca continues to evolve in the global workforce. Their strategic
focus is on business growth in the emerging markets, as they have already noticed that the
work force in these areas have grown substantially. Although this increase in the company
it has also been accompanied by a reduction of employees to improve efficiency and
effectiveness. These reductions have come about through restructuring in R&D, supply and
manufacturing, support functions and our sales and marketing workforce in established
markets. Since 2006 AstraZeneca has reduce the number of employees by some 9,600 from
66,800 to 57,200. This decrease includes a reduction of 2,600 positions in 2010 and a
further 5,000 in 2011, which resulted from AstraZeneca business change plans, announced
in 2010. During 2011, the most significant business change was the implementation of the
R&D strategy announced in 2010, which also involved a number of site changes.
Approximately 1,400 roles, almost all R&D employees worldwide were impacted in some
way by this change in order to control further job losses, over 750 employees were
16
redeployed in the correct areas. In addition, there were reductions in the number of roles
in several areas of our sales and marketing organization in 2011, which were incremental
to the ongoing restructuring programmer announced in 2010. In the US alone there was a
reduction was reduced by approximately 1,150 leadership positions and sales
representative roles. AstraZeneca is committed to ensuring that core values, robust people
policies, consultation infrastructure and prior experience are integrated into our multi-
faceted business transformation. AstraZeneca includes trade unions and employee
representative groups are involved throughout the restructuring process. AstraZeneca
investment significantly in outplacement support and with this high levels of success were
achieved in finding employees opportunities outside the US in 2011. AstraZeneca makes
sure that there is a level of global consistency in managing employee relations but at the
same time allowing enough flexibility to support the local markets. Building good relations
with their workforces, taking into account local laws and circumstances are many of
AstraZeneca core values.
Competitive Comparison (Direct and Indirect)
Pfizer continues to have a strong sales and marketing infrastructure, which has
allowed them to revive their credentials with the recent success of Lyrica, Sutent and
Chantix. Although they have seen brighter days they still suffer from low growth potentia l
therapy area markets and limited penetration into the biologics market. Johnson &
Johnson continues to dominate branding and have numerous successful subsidiaries that
allow them to maintain expertise in various therapy areas where their product
diversification has positive revenue growth projections.Generic competition continues to
17
affect the sales of small molecule products, where generics is rampant, and will continue to
affect it with the creation of new products.
Marketing & Sales Strategy
Key Market Segments – Target Market(s)
Astra Zeneca Plc. has few target markets due to the business that they are in. These
Target Markets are Health Care professionals and those who pay for healthcare. They
utilize face-to-face is their traditional marketing method. They have adopted new methods
to market their product and they have utilized this method in the North America and
Europe markets.
Positioning
Astra Zeneca is responsible for development of healthcare medicine in six different
areas such as Oncology, Respiratory, Gastroenterology, and etc. An example would be
Nexium, which is Astra Zeneca’s largest product launched; they are targeting clients and
healthcare specialists within each specialty.
Brand Strategy
There specific strategy is biopharmaceutical, integrated, innovation-driven and
focused. In the biopharmaceutical aspect of the strategy that they will develop biological
and chemical medicines, meaning both large and small molecular medicines. It is also
18
focused driven, meaning that they will be very selective in the areas within the
pharmaceutical areas in which they will compete. They will target product categories in
which they can promote innovation and their brand equality shall be able to bring
acceptable levels in return from their investments. They strongly believe in order to obtain
the full potential from the market; they will work on their chain of discovery (research)
and development while establishing partnerships and outsourcing to establish
efficiency. Their Technology base will provide innovations for new products to be
delivered to the market that ultimately will benefit patients. Astra Zeneca strongly feels
that they are able to meet the needs of the established global markets and the emerging
markets efficiently and effectively.
Marketing Mix Strategies
They segment their products according to needs and resources in the target
markets. An example would be the medication Crestor, which is currently being marketed
in the U.S. The reason being why Crestor is being marketed more in the U.S. than in other
areas is due to the obesity rate and levels of cholesterol in the U.S. is in all time high. Also
they market Oncology medications and by doing so they alter the packaging of the product
so the patient remembers to adhere to take the medication. They also package the
medication a bit more discrete so the client (patient) will not feel a negative connotation
towards their condition. Astra Zeneca reaches out and establishes programs to help
individuals with low resources in order to obtain the appropriate treatment at a reasonable
price. They have entered the generic realm of pharmaceuticals meaning that price will
have to be in a more reasonable price for consumers.
19
Innovation Profile and Strategy
In the aspect of innovation, they (Astra Zeneca) are dedicated to the discovery,
development, manufacturing and commercialization of medicine. Through many
partnerships and various agreements with large institutions they are providing large
innovations for the pharmaceutical industry. An example is the collaboration between
University of Manchester, GSK and AstraZeneca, which will allow each partner over a three-
year period and will bring together scientists from both the pharmaceutical industry and
academia. In the US, Astra Zeneca utilizes social media to recruit patients for clinical trials
in order to establish if the drug therapy is safe and effective to its initial purpose. They
have also helped partner up with governments such as Germany to establish programs that
will help screen certain diseases such as cardiac diseases; the public and private sectors of
health care funds funded this. In Brazil they helped establish a program called “Well
Being”, which allows for individuals to obtain discounts and incentives for those
individuals who adhere to the treatment regimens. The physician registers these patients
and conducts thorough examinations and sends the information to Astra Zeneca and then
the company shall send the patient a discount coupon for the specific medication
pertaining to their diagnosis. By doing so, this helps establish their mission, which is to
benefit for society in obtaining medical treatment at a more obtainable rate for those in
need.
“A recent survey showed that up to 50% of patients don’t take their medicines as
they should - even cancer therapies. This fact triggered our Global Packaging team to take a
close look at how the packs that our medicines come in could help to encourage patients to
20
take the medicines as prescribed. Improving adherence by just a few percent could
significantly improve treatment outcomes for the patient (and the associated sales would
also be good for our business). We are pursuing the opportunity to use pack design to
influence adherence through a range of ‘customized’ initiatives. In Canada, for example, a
version of our breast cancer therapy, Arimidex, has been launched in packaging that
resembles a cosmetics case to make the pack more discrete and less intimidating for
patients to use. In Spain, the packaging for our pediatric asthma inhalers now features an
image of a kite – associated with fresh air and physical activity – to help children feel more
positive about taking their medicine. These are the first in a range of packaging innovations
that we are planning to help patients along their medication path and we will be publishing
more about these on this website shortly.”
Sales & Service Strategy
Concentration on commercial success contributes to prosperous sales for any
organization. AstraZeneca includes customer insights into their R&D strategy early on in
the life cycle of their medicines and they maintain a centralized commercial organization
that cultivates global product strategies, which are implemented by local leaders in
individual markets to ensure concentration on customers’ needs and preferences. To keep
up with the changing markets and needs of payers, customers and healthcare professionals
AstraZeneca has consolidated its efforts into 3 regions, which are the Americas, EMEA and
Asia-Pacific where the regional sales and marketing organization is run from 3 main sites
that are in Wilmington, Delaware U.S., London, UK, and Shanghai China, that are able to
deliver market specific content while allocating resources in a cost effective manner
21
allowing the identification of markets of major significance. AstraZeneca’s values are
always included in all sales and marketing activity for responsible commercial success and
brand sustainability. In 2011 focus remained on the key products Crestor, Seroquel XR and
Symbicort whom all earned double digit sales growth, and emerging markets including
China, Brazil, Mexico and Russia which earned $5.8 billion, which is 17% of the total
revenue. New product launches in 37 markets garnered $274 million in revenue. The
creation of new sales models that include wholly owned local marketing in most countries
and distributor or local representative offices in others with the focus on primary care and
specialist doctors using the traditional face-to-face marketing method. Sales and marketing
training programs are available to increase the effectiveness of the sales force by
“embedding core commercial skills and strengthening sales managers’ coaching and
planning skills while also reflecting local market needs and conditions”, as outlined in the
annual report.
Financial Analysis
Profitability, Liquidity, & Leverage Ratios
Profitability
Ratios that show profit margins represent the firm's ability to translate sales dollars into profits at
various stages of measurement.
AstraZeneca Pfizer
Johnson &
Johnson
22
Net Income 9,470 $10,009 9,672 Sales 33,591 $67,425 65,030
Profit Margin
Net Income/Sales 0.28 0.15 0.15
Total assets 52,830 $188,002 $113,644
Return on assets (ROA)
(Net Income/Total assets) 17.93% 5.32% 8.51%
Total equity 23,472 82,621 57,080
Return on equity
(ROE)
(Net Income/Total
equity) 40.35% 12.11% 16.94%
Table 1:Profitability
Profit margin ratio( Net Income / Sales ) is 0.28 of AstraZeneca is more than Pfizer and
Johnson & Johnson means they it has better control over its costs compared to its
competitors.
ROA (Net Income / Total Assets) of AstraZeneca is 17.93 which is higher than Pfizer
and JNJ. This is good because it means the company is earning more money on less
investment when compared to others.
ROE (Net Income / Total Equity) of AZN is 40.35 which is higher than Pfizer and JNJ.
This is good because it indicates how well management is employing the investors'
capital invested in the company.
Thus overall all the profitable ratios for AZN are better than JNJ and Pfizer.
Liquidity
Liquidity has to do with a firm's assets and liabilities. In particular, liquidity looks at whether or
not a firm can pay its current debt with its current assets.
AstraZeneca Pfizer Johnson & Johnson
Current Assets/ 23506 57728 54,316
Current liabilities 15752 28,069 22,811
Current ratio 1.49 2.06 2.38
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Table 2:Liquidity Ratio-short term
Current assets over current liability of AstraZeneca show that they have liquidity to pay its
current debt with its current assets. So they have sufficient liquidity to pay any immediate short
term liability (because the ratios > 1). Their competitors have more liquidity than AZN but
having a very high liquidity doesn’t necessary mean that they are efficiently utilizing cash and
capital. AZN is maintaining a good balance between the short term liquidity and efficiently
utilizing their capital which is seen in their Profitability.
Leverage Ratios
AstraZeneca Pfizer
Johnson &
Johnson
Total assets 52,830 188,002 $113,644
Total equity 23,472 82,621 57,080
Total Liabilities 29,358 105,381 56,564
Total debt ratio (Total assets-Total equity)/Total
assets 0.56 0.56 0.50
Total debt is total liabilities 29,358 105,381 56,564
Debt-equity Ratio
(Total debt/Total equity) 1.25 1.28 0.99
EBIT (operating profit) 12,795 12,762 12,361
Depreciation 2,550 9,026 3,158
EBITDA 15,345 21,788 15,519
Table 3: Leverage Ratio-long term
Debt Ratio: A debt ratio of greater than 1 indicates that a company has more debt than
assets; meanwhile, a debt ratio of less than 1 indicates that a company has more assets
than debt. Used in conjunction with other measures of financial health, the debt ratio can
help investors determine a company's level of risk.
AZN debt ratio is less than 1 this indicates they are able to pay debt over assets. And risk
level of the AZN is low. AZN is able to balance with their competitors.
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Debt – Equity Ratio: AstraZeneca does have a higher Debt-Equity ratio when compared
to its competitor. This could be a point of concern. But looking at it efficient utilization of
capital and ROE it shouldn’t be too much of a concern. It is something to keep an eye on.
Asset Turnover
AstraZeneca Pfizer Johnson & Johnson
SALES 33591 67425 65030
TOTAL ASSETS 52830 188002 113644
Total Assets Turnover
Sales/total assets 0.64 0.36 0.57
Table 4: Assets turnover
Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the
higher the number the better. AZN has better Asset Turnover (0.64) than Pfizer and JNJ. This
means that AZN efficiency at using its assets in generating sales or revenue is better than
competitors.
P/E Ratio:
AstraZeneca Pfizer Johnson &
Johnson
Net income after taxes 9,470 10,009 9,672
No of common stock share outstanding 1,367 7,870 2,775.30
Basic Earnings per share
Net income after taxes/No of common stock share outstanding 6.93 1.27 3.49
Price per share (Dec 30 2011) 43.56 20.83 63.24
Price-Earnings (P/E) Ratio
Price per share/ Basic Earnings per share 6.29 16.38 18.15 Table 5: P/E ratio
AZN has low P/E ratio than other competitors. That means investors value JNJ and Pfizer more
than AZN. Hence we feel that AZN is undervalued. Reasons why we value more is because it’s
25
operational efficiency, itsnew drug in the pipelines & Acquisition of Medimmune their new
vaccinations. Also one of the reasons that AZN is undervalued can be seen by looking at P/B
ratios.
Market-to-book value ratio
Best of all, P/B provides a valuable reality check for investors seeking growth at a reasonable
price. Large discrepancies between P/B and ROE, a key growth indicator, can sometimes send
up a red flag on companies. Overvalued growth stocks frequently show a combination of low
ROE and high P/B ratios. If a company's ROE is growing, its P/B ratio should be doing the same.
AstraZeneca Pfizer Johnson &
Johnson
Return on equity (ROE) (Net Income/Total equity) 40.35% 12.11% 16.94%
Book value per share 17.17 10.50 20.57
Market-to-book ratio Market value per share/Book value per share 2.54 1.98 3.07
Table 6: market-to-book value ratios
If you see in the above table you see JNJ ROE, which is low 16.94% less than AZN and the JNJ
has higher P/B ratio. This shows that the JNJ is overvalued growth stock as compared to AZN.
So we conclude that AZN is undervalued stock.
26
SWOT Analysis Summary
AstraZeneca has risen to becoming one of the top pharmaceutical companies of this
generation after a successful merger on April 6, 1999 of Astra AB of Sweden and Zeneca
Group PLC of the UK. AstraZeneca is the UK’s second largest pharmaceutical company
spanning 6 areas of healthcare including cardiovascular, gastrointestinal, infection,
neuroscience, oncology and respiratory, with over 30 medications on the market, and
operations in the Americas, Europe and Asia. (“AstraZeneca PLC SWOT Analysis,” 2012)
The financial performance for 2011 as described by the Chairman, Louis Schweltzer,
included an increase in operating profit of 10% at $12,795 million (2010: $11,494 million),
strong sales growth for Crestor, Seroquel XR and Symbicort, and a decline in revenue of 2%
in the U.S. as well as an 11% decrease in Western Europe due to government pricing
interventions and generic competition. (Schweltzer, 2012)
Strengths Weaknesses
Sales growth of Crestor, Seroquel XR and Symbicort.
Advancements in Biologics and Vaccines through acquisition of MedImmune
Cost control efforts increasing operational efficiency.
Maintains a strong global presence
Expiring Patents Regulatory requirements R & D productivity
Pricing Pressure
27
Opportunities Threats
Advances in science and technology Further expansion in emerging markets Amgen collaboration for inflammation drugs Acquisition of Ardea which is a U.S. biotechnology company
Generic Competition
Illegal trade in products
Patent litigation in respect of IP rights
Economic, regulatory and political pressure
Strengths
Sales growth of Crestor, Seroquel XR and Symbicort.
In 2011 some of AstraZeneca’s top performing medications showed promise with an
increase in sales. Crestor, Seroquel XR and Symbicort had gains in sales value of 13%, 27%
and 11% respectively. (“Annual Report,” 2011) These increases have been consistent since
the 2009 fiscal year and show no signs of a reversal. In the Dow Jones Sustainability World
and European indexes, which evaluates the sustainability performance of the largest 2500
companies on the Dow Jones Total Stock Market Index, AstraZeneca ranked in the top 7%.
(“Annual Report,” 2011)
Advancements in Biologics and Vaccines
After purchasing MedImmune, a U.S. biotech firm, in April 2007, AstraZeneca entered the
market of vaccines for the first time.Former CEO David Brennan stated,
“This acquisition represents a transformational step to deliver our biologics strategy
sooner than anticipated… It creates a leading fully integrated biologics and vaccines
28
business with critical mass and enhances AstraZeneca's R&D science base through
which we will deliver a stronger product pipeline". (Gibson, 2007).
As of March 2012 the FDA approved the first four-strain influenza vaccine, FluMist
Quadrivalent.This vaccine covers two strains of type A and B influenza providing a larger
protection for consumers and increasing the potential for a larger portion of the market
due to its increase in strain coverage and inclusion of eligible individuals from 2 -49 years
of age over competitors.The vaccine garnered its first significant contract outside of the U.S.
as of July 2012 when it was announced that Britain would administer FluMist to all
children aged 2 – 17 for free.Treatments for cancers of the blood and solid tumors are apart
of AstraZeneca’s biologics pipeline. (“AstraZeneca PLC SWOT Analysis,” 2012)
Cost control efforts increasing operational efficiency.
As of February 2012, AstraZeneca has implemented new restructuring initiatives to
improve operational efficiency, research and development capabilities and improve
productivity. As outlined in a press release on February 2, 2012 projected annual benefits
are estimated at 1.6 billion by 2012 and will reduce the headcount by 7,300 positions.
There are now 3 global market regions, reduced from 5, and the smaller countries have
been clustered to enhance utilization of resources and reduce the cost base while
increasing shared services. Digital technology, call centers for sales and medical advice is
being utilized to provide advanced and high quality services at a lower unit cos t for
healthcare professionals. AstraZeneca’s R&D has also undergone restructuring with most
of it focused on the neuroscience therapy area where internal expertise is combined with
external science and the creation of a virtual neuroscience Innovative Medicines unit
29
(iMed) that consists of a team of 40 to 50 AstraZeneca scientists and will partner with
external sources. Although there is restructuring in R&D AstraZeneca continues to invest
in the areas they have succeeded in which include cardiovascular, gastrointestinal,
infection, oncology, neuroscience and respiratory & inflammation. The supply chain has
seen change in the outsourcing of the production of active pharmaceutical ingredients as
well as some other manufacturing to increase efficiency.
Maintains strong global presence
AstraZeneca operates in over 100 countries, employing 57, 200 people worldwide. It is the
second largest pharmaceutical company in the U.K. According to the AstraZeneca’s
chairman Louis Schweltzer, “the world pharmaceutical market grew by 4.5% in 2011 and
the fundamentals of the industry remain strong.” With this increase in the world market he
went on to discuss the attributes of the pharmaceutical market which includes an increase
in population and age, passing the 7 billion mark in 2011, an increase in patient numbers in
new markets unaware of AstraZeneca’s current and future products, an increase in chronic
diseases in all classes of the world and more advances in science and technology for
emergence of new medicines. (“Annual Report,” 2011) These variables contribute to a
growing market that AstraZeneca can take advantage of in the coming years.
Weaknesses
Expiring patents
As of 2012, 8 patents have expired on AstraZeneca’s key marketed products, totaling 3,487
million in U.S. revenue. (“Annual Report,” 2011) That loss coupled with the future loss of
other key product patents can be a devastating blow to any pharmaceutical company. The
30
strong sales of Crestor, Seroquel XR and Symbicort also face expiration in 2016, 2017 and
2018 respectively, with sales totaling 5,675 million. Other patent challenges include
validity and/or effective scope of the patent. (“Annual Report,” 2011)
Regulatory requirements
Regulation of the pharmaceutical industry remains high to ensure safety, effectiveness and
responsible promotion of medicines being sold. Regulations on the industry continue to
increase and are diverse throughout each country. (“Annual Report,” 2011) As technology
has expanded so has the demand for access to data, specifically clinical data, as well as the
implementation of policies absent of guidelines defining personal, private and proprietary
information that would provide a safeguard of data from public disclosure. (“Annual
Report,” 2011) Pressure from health technology assessors and payers also continue to
mount pressure in relation to safety and effectiveness. (“Annual Report,” 2011)
R & D productivity
Globally, investment in R&D in the pharmaceutical industry has reached over $130 billion
in 2011, which was an increase of 93%. Although there was a dramatic increase in
investing, new drug launches per year did not increase, and in fact stayed the same in the
U.S. averaging 25 per year. Regulations also increase length of development times and
increase development costs. (“Annual Report,” 2011)
Pricing Pressure
Dynamic pricing and reimbursement environments in markets are affected by the cost
containment in healthcare that includes pharmaceutical spending containment. (“Annual
Report,” 2011) The pressure of pricing has increased over the years such as in Europe Italy
31
has mandatory discounts, in Germany there are freezes on permitted pharmaceutical
prices, in China there are cuts to maximum permitted retail drug prices and in Canada and
the U.K. risk sharing agreements are increasing. Germany is the largest pharmaceutical
market in Europe and recent reforms in healthcare has affected how patent protected
drugs are accessed and there is no longer a free market for pricing and reimbursement.
(“Annual Report,” 2011) Biennial cuts in Japan and South Korea are expected to remain
constant. (“Annual Report,” 2011) Hospital tariffs also pose a threat to sales by providing
incentives for hospitals to select generic substitutes that have lower costs. (“Annual
Report,” 2011)
Opportunities
Advances in science and technology
New technology and its application to previous advances in disease understanding will
improve delivery and availability of new medicines for many existing and unmet medical
needs. Biologics is an important factor for the success of new products and the advances in
science and technology will lead to new opportunities for using small molecules in new
medicines. (“Annual Report,” 2011) 45% of sales are forecasted to come from biologics
from the world’s top 100 pharmaceutical products, which is an increase of 12% from the
previous year. (“Annual Report,” 2011) With 4 principal biologics manufacturing facilities
within the U.S., U.K,and Netherlands AstraZeneca has scalable capabilities of process
development, manufacturing and distribution of biologics including supplying MAbs and
influenza vaccines worldwide. According to MedImmune’s website,biologics are developed
from human or animal proteins which support the body’s immune system in the treating,
32
prevention or curing of an illness. Most notable examples of them are vaccines and insulin
and new developments in debilitating diseases and other therapy areas has expanded over
the last few decades.
Further expansion in emerging markets
Estimated sales for 2015 in countries show an overall growth increase of over 40%
worldwide, with North America having 1.5% growth. (“Annual Report,” 2011) As
discussed previously the world pharmaceutical market had an increase of 4.5% in 2011
and emerging markets average revenue growth was 12%. Middle-income countries have
seen an escalation in chronic disease and are starting to emerge in low-income countries as
well. Population ageing and poor health habits also increase the likelihood of chronic
diseases. (“Annual Report,” 2011) Industry estimates predict rises in healthcare spending
in emerging markets of China, Russia, Brazil, and India of 49% from 5.3 trillion in 2010 to
7.9 trillion in 2020 and by 2030 emerging markets will account for 60% of global GDP.
(“AstraZeneca PLC SWOT Analysis,” 2012)
Amgen collaboration for inflammation drugs
As reported in the Wall Street Journal by Ben Fox Rubin (2012), AstraZeneca has inked a
deal in April of this year to “jointly develop and commercialize five inflammatory disease
treatments in Amgen’s portfolio” (para. 1). This collaboration as described on
AstraZeneca’s website is “a new phase in biopharmaceutical business development…”,
which is sure to lead to new medicines ranging across a number of disease areas and
helpful to AstraZeneca due to shared costs for development and commercialization
responsibilities.
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Acquisition of Ardea, which is a U.S. biotechnology company
Andrew Jack and Jennifer Thompson of the Financial Times (2012) reported on the
acquisition of Ardea for 1.3 billion that specializes “in developing Lesinurad a compound
that acts as a selective inhibitor to help regulate high levels of uric acid in the bloodstream”
(para. 4), which is Ardea’s most advanced clinical-stage product.This particular medicines
targets gout and is estimated that 14.7 million cases in 2009 and forecasted to rise to 16.6
million in 2019, over a 10% increase.
Threats
Generic Competition
Generic competition remains one of the largest threats to any organization in the
pharmaceutical industry. The approval and launch of medicines can span anywhere from
13 to over 20 years and cost companies in the millions before it even hits the market.
Generic medicines offer lower costs, which are extremely attractive to consumers and
health professionals and payers. The U.S. market’s majority contender is generics, holding
80% of the market. Generic medicine is also predicted “to be the single largest driver of
value growth up to 2015”, as stated in AstraZeneca’s 2011 annual report. When patents
expire generic availability rises and generic manufacturers investments are lower in R&D
and market development.
Illegal trade in products
Counterfeiting of medicines costs go far beyond economic alone. Public health and loss in
confidence for the brand due to a lack of certainty of integrity of the supply chain outweigh
34
any economic losses. The reputation of the company is at stake when others unlawfully
deceive consumers with fraudulent products that may have adverse affects. In certain
instances a recall may be implemented because of a fraudulent product exhausting valuable
resources and creating unnecessary expenses.
Patent litigation in respect of IP rights
The challenges of patents or assertion of litigation against infringers can result in expensive
legal costs and unsuccessful judgments, injunctions, or evenliabilities for damages or
royalties. Protecting patents include time and capital that waste well needed resources for
an organization.
Economic, regulatory and political pressure
Pressures to reduce production costs are continuing to be a burden as regulations and
political pressures rise. After the Affordable Care Act was passed increasing rebates and
discounts for Medicare and Medicaid patients. Other health system delivery reforms will
also take affect over the course of the implementation of the law during 2010-2014. The
number of patients will expand as more Americans become eligible for insurance coverage.
By 2014 businesses will be able to send employee coverage into the health insurance
exchanges and have an adverse affect on the pharmaceutical industry explained in the
annual report as exchangesnot offering “a prescription drug benefit that is as robust as
benefits historically provided by large employers.”
SWOT Conclusion
Use it to inform how they got here and what to do going forward
35
Recommendations
Conclusion
36
Appendix