AstraZeneca plans to axe around 7,600 jobs as part of an expanded cost-cutting drive, it said on Thursday as it nudged up its 2007 earnings outlook.
The Anglo-Swedish drugmaker, which announced in February it planned to cut about 3,000 positions, said it would increase the job cuts to more than 10% of its 2006 workforce in a drive to make over $900 million of annual savings by 2010.
Chief Executive David Brennan said the additional job losses would affect its European sales and marketing team as well as employees working in research and development and other areas in Britain, Sweden, Germany, France, the United States and Canada.
The cost of the restructuring will be $1.6 billion. The news overshadowed a complicated set of second-quarter results. Earnings per share excluding restructuring costs and expenses related to the recent acquisition of U.S. biotech firm MedImmune rose 17% to $1.19, on sales up 10 percent at $7.27 billion.
The average industry analyst forecast for sales had been $7.17 billion, according to Reuters Estimates.
Including the MedImmune and restructuring costs, however, earnings fell 7% to 95 cents a share, and pretax profit was down 10% at $1.99 billion.
AstraZeneca narrowed its 2007 underlying earnings forecast per share to between $3.90 and $4.05 from $3.80 to $4.05 previously, which Brennan said reflected the strength of the business.
"The underlying performance of the company remains strong, and we are looking forward to realising the opportunities offered by MedImmune," he told reporters in a conference call.
"We are confident that we are on track to deliver our revised full-year target."
Traders said some investors had been hoping for a positive surprise after GlaxoSmithKline cheered the market with a major increase in its share buyback program on Wednesday.
"The initial market reaction probably reflects difficulty in understanding where consensus was and how these numbers fit in, rather than anything being too disappointing," said Tim Race, a pharmaceuticals analyst with ING.
"The underlying picture looks okay. Nexium sales are flattening, but we expected that," he added.
Few analysts had calculated earnings on the revised basis presented by AstraZeneca.
The London-based group has embarked on an aggressive programme of acquisitions to rebuild its pipeline, following a series of late-stage product setbacks, while at the same time restructuring manufacturing to save costs.
Brennan said he continued to look for opportunities but declined to comment on specific acquisitions, such as AstraZeneca's rumoured interest in Acadia Pharmaceuticals Inc.'s experimental schizophrenia drug, pimavanserin.
AstraZeneca's stock has been under pressure due to its weak pipeline and the poorly received deal with MedImmune in April.
But the shares have gained ground in the past month and now trade at 12.8 times forecast 2008 earnings, a 12% discount to the European sector average.
Investors have also been unsettled by the imminent departure of respected Chief Financial Officer Jon Symonds, who leaves at the end of this month to join Goldman Sachs. Brennan said a search for his replacement was underway, and the company's financial controller, Paul Kenyon, would act as interim finance head.