) announced that it will reduce its US sales force by approximately
24% or 1,150 employees. The company's decision to cut its sales
force is in line with its strategy of improving efficiency and
delivering better results.
Employees in leadership positions as well as sales
representatives will be affected by the job cuts. Though the job
cuts will be finalized by early February 2012, employees have the
option to self-identify and leave AstraZeneca.
The layoff decision comes with an associated cost of $50 million
- $100 million, which will be charged in the fourth quarter of
2011. These costs will not impact AstraZeneca's core financial
measures. The company maintained its core earnings guidance range
of $7.20 - $7.40 per share for 2011.
These changes were not included in AstraZeneca's previously
announced restructuring program. In the first phase of the
restructuring program, the company achieved annual benefits of $2.4
billion by the end of 2010 at a cost of $2.5 billion incurred
between 2007 and 2009.
The ongoing second phase of the restructuring program was
announced in January 2010. In this phase, AstraZeneca aims to
deliver additional annual savings of $1.9 billion by 2014 at a cost
of $2 billion.
We currently have a Neutral recommendation on AstraZeneca. The
stock carries a Zacks #3 Rank (Hold rating) in the short run. Even
though we are encouraged by the strong cardiovascular franchise at
AstraZeneca and the company's focus on the high-potential emerging
markets, we remain concerned about the generic competition faced by
its key products. The job cuts are a part of the company's
cost-cutting initiatives in the face of increasing generic
ASTRAZENECA PLC (
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