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AstraZeneca’s new CFO must arrest slide in fortunes

NEWLY APPOINTED AstraZeneca CFO Marc Dunoyer (pictured) will hope he can arrest the UK drug maker’s worrying slide in fortunes, after profit and sales tumbled for the seventh consecutive quarter, underscoring the challenge facing the company.

Dunoyer, who joined from rival GlaxoSmithKline in June and currently heads product strategy, will succeed Simon Lowth, whose departure to join gas and oil producer BG Group was previously announced.

The British drug maker has struggled due to the loss of patent protection on a number of key drugs, which accounted for $350m (£218m) of the drop in sales in that quarter. Overall sales fell 6% in the quarter to $6.25bn, while pre-tax profits slumped 20% to $1.59bn, compared to the same quarter last year.

The Financial Times reports that AstraZeneca has underperformed its European sector by 25% over the past two years. According to the bleaker predictions, the company stands to lose about half of its $33bn in annual revenues by 2016.

The company’s newer products are also encountering problems, with US authorities probing the trial of heart drug Brilinta, casting doubts over the effectiveness of the medicine.

Brilinta sales have been a disappointment since its launch two years ago, according to reports, although AstraZeneca has recently stepped up marketing efforts and hopes further clinical tests will underscore its value in preventing heart attacks.

Fabian Wenner, an analyst with Kepler Cheuvreux in Zurich, suggested the appointment of a new CFO will raise expectations that the company will quicken the pace of acquisitions to replace lost revenue.

“The key issue is the top line,” Wenner told Bloomberg. “They can counter by cost-cutting but the question is what’s going to happen long-term.”

Closer to home, those cost-cutting measures have seen lab closures, causing the loss of 71 jobs at its environmental impact assessment facility in Brixham, Devon in October. The news followed the company’s announcement in March that it would be axing 700 jobs in the UK and moving 300 others overseas, closing a site in Cheshire and opening a new research and development unit in Cambridge.

Considering this, Dunoyer has a mighty task. He has extensive experience working in the industry, with previous roles at pharmaceutical giants Roussel Uclaf and GSK, where he was regional president Asia Pacific & Japan before becoming global head of rare diseases and chairman of GSK Japan.

His latest role is not without incentives: his base salary will be £680,000 per annum; his annual bonus potential will be in the range of 0%-150% with a target annual bonus of 90% of base salary; and his target long-term incentive award will be 200% of base salary. Full details will be published in AstraZeneca’s annual report for 2013, and his remuneration will next be reviewed at the end of 2014.

His arrival has seen a small upturn in positivity over the ailing company’s prospects, with the FT reporting that Merrill Lynch advised closing short positions in anticipation of a “glut of news” on its experimental drugs. It listed five product launches and 14 drug trials due to conclude in the next 12 months.

The FT added that the broker told clients the company “has been devoid of news flow for years. We remain cautious on commercial success of most assets. However, we acknowledge positive data could aid perception of a long-term turnround.”

Pascal Soriot, AstraZeneca’s CEO, said of the appointment: “Following a thorough search, it became clear Marc possessed the rare blend of financial, business and science experience that will be critical in this role in the coming years as we focus on returning AstraZeneca to growth and achieving scientific leadership.”

STATS AND OPPOSITE NUMBERS

Profit
2012: $2.06bn
2011: $2.33bn
Source: Bloomberg

Overall sales fell 6% in the quarter to $6.25bn, while pre-tax profits slumped 20% to $1.59bn

Opposite numbers
Simon Dingemans, GSK
Unlike Dunoyer, Dingemans has not been charged with the task of a turnaround in fortunes – GSK has regularly outperformed AstraZeneca over the past two years and the company posted pre-tax profits of £7.64bn in 2012.
Dingemans joined the pharmaceutical company from Goldman Sachs International where he was a managing director and partner.

Werner Baumann, Bayer
Baumann joined Bayer AG in 1988 and became chief financial officer in 2010. Like GSK, it has outperformed AstraZeneca in the past few years. In 2012, the company posted £3.2bn net profit, and it almost doubled its profits in 2011.

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