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Pared-down AstraZeneca to cut one in 10 jobs

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(Globalpost/GlobalPost)

By Ben Hirschler

LONDON (Reuters) - AstraZeneca's <AZN.L> new chief executive announced another 2,300 job cuts in sales and administration on Thursday as he set out his stall for turning round the struggling drugmaker and returning it to growth.

The latest cutbacks mean the group will shed around a tenth of its workforce, or 5,050 jobs, by 2016 as sales shrink due to patent expires on several top-selling medicines.

Pascal Soriot said he had no quick fix for the company and ruled out the idea of diversifying away from prescription drugs, as several rivals have done.

Instead, he plans to focus research efforts in three main disease areas and strike more external deals - such as a $240 million (158 million pounds) tie-up with Moderna Therapeutics - in an effort to replenish a sparse new drug pipeline.

It promises to be a long haul. Still, AstraZeneca believes it can double the number of drugs in late-stage development by 2016 and by 2018 it expects revenue to "significantly exceed" the current market consensus of $21.5 billion.

Investors may be reluctant to give Soriot much credit until they see concrete signs of new drugs nearing the market.

"It is a serious mountain to climb," said Navid Malik, an analyst at Cenkos Securities. "It took GlaxoSmithKline <GSK.L> 10 years and two patent cliffs before it could finally could say it would grow again this year."

The former Roche <ROG.VX> executive gave an overview of his strategic thinking in a statement issued ahead of a briefing for analysts and investors, starting later in the day in New York.

He had already presented a blueprint for overhauling R&D operations on Monday, involving the loss of 1,600 jobs. Another 1,150 posts will go under a programme from 2012.

The combined changes will result in a one-time costs of $2.3 billion and yield benefits of $800 million a year by 2016.

"We are making an unambiguous commitment to concentrate our efforts and resources on our priority growth platforms and our priority pipeline projects," Soriot said.

SHRINKING FAST

Soriot confirmed plans - first disclosed in an interview with Reuters on Monday - to focus R&D on three key therapy areas: cancer; cardiovascular and metabolism disorders; and respiratory and inflammatory diseases. It will reduce spending on neuroscience and anti-infectives, including antibiotics.

Up to 50 percent of the post-tax, pre-R&D cashflow from existing products will be reinvested in research, external deals and capital investment.

At the same time, Soriot expects to keep underlying margins, before research and development (R&D) costs, in the range of 48 to 52 percent - and he sought to reassure investors by pledging to maintain a progressive dividend policy.

The group also plans to change long-term incentives for top management "to maximise alignment with the strategy of returning to growth and achieving scientific leadership".

AstraZeneca is shrinking fast as it tries to cope with generic competition and disappointing progress in finding new drugs. It now employs a total of 51,700 people worldwide. Analysts, however, said the latest cutbacks in the sales force were simply tracking an inevitable decline in revenue.

The approach taken by Soriot, a vet by training, will involve an increased focus on acquisitions of promising drugs and smaller companies.

Analysts believe AstraZeneca could easily spend $20 billion and there has been speculation of a major deal, such as buying Shire <SHP.L>. Soriot, however, favours bolt-on deals and has previously said a major buy is unlikely.

More typical of his style may be Thursday's alliance with unlisted U.S. biotech firm Moderna, which will involve AstraZeneca paying $240 million upfront to access a selection of early-stage so-called messenger RNA drugs.

AstraZeneca shares, which were 0.6 percent higher by 0950 GMT, trade at a discount to other Big Pharma stocks because it is in a particularly tough spot.

Its two top drugs - Nexium for stomach acid and the cholesterol pill Crestor - lose U.S. protection in 2014 and 2016, punching a big hole in future revenues.

Analysts, on average, expect sales to fall from $28 billion in 2012 to just over $22 billion in 2017, according to a consensus forecasts compiled by Thomson Reuters.

(Editing by David Cowell and David Holmes)

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