AstraZeneca backs UK research in battle to restore drugs pipeline



The new chief executive of ailing drugs maker AstraZeneca (NYSE: AZN - news) plans to bolster UK research and development in an attempt to build a "dramatically different pipeline" by 2016, according to people close to the business.

Pascal Soriot, who joined the business in October last year after the departure of David Brennan, ousted as a result of the Shareholder Spring, is understood to be putting research and development (R&D) at the centre of plans to restore the company to growth.

The areas of R&D that attract more investment could lead to more highly skilled jobs, in a boost for the British economy, where other companies, such as Pfizer (NYSE: PFE - news) , have cut back.

However, the overall head count at AstraZeneca could still fall. As Mr Soriot unveils his plans for expansion alongside the company's full-year results on January 31, he is also expected to reassure shareholders that the dividend is secure, and that he will pursue a growth strategy aimed at a fundamental revaluation of the share price by analysts.

He is said to be confident that his plans for growth will lead to a so-called "re-rating" of the stock, which will improve the price-to-earnings ratio and earnings to investors.

Among his plans for R&D, Mr Soriot is expected to state that the company will cut the number of projects, but reinvest the money saved into those projects that remain, giving them a better chance of success. Speciality, or "targeted", areas of medicine are expected to be central to this strategy, with more effective treatments focused on a smaller number of sufferers.

The new strategy comes as AstraZeneca battles expiring patents from blockbuster drugs and a lack of developments in the pipeline reflected in the company's share price when compared with the more diversified GlaxoSmithKline (Other OTC: GLAXF - news) .

The former Roche executive is also expected to outline acquisition plans for AstraZeneca, centred heavily on "bolt-on acquisitions" takeovers that fit naturally within the company's existing business lines or strategy.

One source close to the company said that Mr Soriot's overall message to shareholders would be focused on returning AstraZeneca to growth, through a strengthening of R&D and bolt-on acquisitions.

It is unlikely Mr Soriot will look for big takeovers, but he has not ruled this out either, it is understood.

The new chief is also under pressure to rejuvenate staff morale, and is said to be keen to reinject a can-do attitude and risk-taking back into the business. Insiders say staff have lost confidence following a series of scientific setbacks and the lack of big, new discoveries coming from MedImmune, the biotech firm AstraZeneca bought in 2007 for $16bn (£10bn).

The business of drug discovery is a risky one, and Mr Soriot is keen to give power and autonomy back to R&D managers to encourage risk-taking, after years of being one of the most risk-averse companies in the industry.

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