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AstraZeneca to Invest in New Zoladex Facility - Analyst Blog

Posted
11/12/2013 12:05:00 PM
By: Zacks.com
Referenced Stocks:AMAG;AZN;JAZZ;OSIR

AstraZeneca ( AZN ) announced its intention to build a new facility for manufacturing its blockbuster prostate cancer product, Zoladex and plans to invest £120 million ($190 million) for the same. AstraZeneca will build the new facility at its manufacturing site in Macclesfield, UK. The construction work for the site is scheduled to begin in 2013 and is expected to be completed by 2016. Products from the new site will be available from 2017.

The construction of the manufacturing unit will lead to the creation of 200 temporary jobs and secure 300 existing Zoladex jobs. We note that the Macclesfield site has been used to manufacture Zoladex for quite some time. The addition of a new facility should enable AstraZeneca to meet the demand for this impressive oncology drug.

We remind investors that the company initiated a major overhaul of its research and development (R&D) segment in the first quarter of 2013. As per the proposed plans, the company's R&D activities will be primarily centered in three facilities including the UK (Cambridge), the U.S. (Gaithersburg) and Sweden (Mölndal).

The SG&A segment will also be optimized. The initiative will result in the relocation and termination of approximately 2,500 and 5,050 roles, respectively. The company has now initiated the fourth phase of the restructuring program, which integrates the earlier programs along with the new one. The initiative is expected to cost approximately $2.3 billion out of which $1.3 billion ($1.0 billion incurred by end of third quarter) will be incurred in 2013.

The restructuring initiative is expected to generate savings of $800 million per annum by the end of 2016 with 50% of this amount expected to be realized by the end of 2014. This should also drive the bottom line. Streamlining of operations along with increased focus on R&D will benefit the company in the long run.

AstraZeneca carries a Zacks Rank #3 (Hold). Generic competition has adversely impacted AstraZeneca's revenues over the past few quarters. This has put significant pressure on the company. AstraZeneca is looking toward cost-cutting initiatives to drive the bottom line in the face of genericization.

Right now, companies with an attractive Zacks Rank are AMAG Pharmaceuticals, Inc. ( AMAG ), Jazz Pharmaceuticals ( JAZZ ) and Osiris Therapeutics, Inc. ( OSIR ). All these stocks carry a Zacks Rank #1 (Strong Buy).



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