London - AstraZeneca chief executive David Brennan is to step down on June 1 in an abrupt exit after six years in the top job, following rising investor discontent at the company’s performance.
Britain’s second-biggest drugmaker has suffered repeated drug development setbacks, stoking fears about its long-term prospects given a complete reliance on prescription medicines at a time when rivals have diversified.
The group cut its full-year profit forecast as sales fell 11% in the first quarter, badly missing expectations, and underlying earnings dropped 19%, highlighting the need to find new sources of growth as multiple drug patents expire.
Its shares tumbled 5.8% by 10:10 GMT.
AstraZeneca has recently stepped up its pace of deal-making to bring in more promising new drugs from other companies, but Brennan has been under fire from investors for not acting sooner.
He will be replaced on an interim basis by chief financial officer Simon Lowth while a permanent successor from inside or outside the company is found, AstraZeneca said on Thursday.
At the same time, Leif Johansson will succeed Louis Schweitzer as non-executive chairperson on June 1 - three months earlier than planned - and will become chairperson of the nomination and governance committee after the annual meeting later on Thursday.
By moving into his new job early, the former Volvo boss will take charge of the hunt for Brennan’s replacement.
Headhunters Spencer Stuart have been appointed to help with the search.
Brennan’s exit sparked speculation of a change in strategy, but both he and Lowth told reporters AstraZeneca would not rush to change direction.
The company will continue to look for small bolt-on deals, worth up to the low single-digit billions of dollars, Brennan said. AstraZeneca has eschewed “transformational” deals.
Lowth said he looked forward to participating in an annual strategy review process with the board over the summer, adding that any investor updates on strategy were typically given alongside the next set of full-year results.
That may not be enough to satisfy some large shareholders.
“As yet, the company have not managed to convince the market that they have a plan for creating either good future growth or a rewarding plan B for coping with a lack of growth,” said one top-five investor at AstraZeneca. Lowest multiple
AstraZeneca faces a slump in sales, following the loss of patent cover on antipsychotic Seroquel last month, while heartburn pill Nexium and its top-selling heart drug Crestor lose US protection in 2014 and 2016, respectively.
It has few new drugs in development to replace these big sellers and its problems mean it trades on only around seven times this year’s expected earnings, the lowest multiple for any major international drug company.
Brennan, an American who started out as a salesman for Merck & Co, has placated some shareholders in recent years by slashing costs, firing staff, and returning billions in share buybacks and dividends.
But the approach is not seen as sustainable in the long term and recently some investors have called for him to go.
Setbacks for new drugs, including ones for depression and ovarian cancer, mean confidence in the group’s ability to rejuvenate the pipeline internally is at rock bottom - and Brennan has a poor reputation for striking smart external deals.
His 2007 purchase of US biotechnology company MedImmune for $15.6bn was slammed at the time and has been criticised ever since for the high price paid and the scant pipeline rewards it yielded.
In the last few weeks, AstraZeneca has stepped up its deal-making again in a drive led by research head and ex-Pfizer executive Martin Mackay, with moves to buy gout drugmaker Ardea Biosciences for $1.26bn and a collaboration with Amgen.
“After more than six years as chief executive oOfficer of this great company I have decided that now is the right time to step down and allow a new leader to take the reins,” Brennan said, adding that he formally told the board on Wednesday. Hit coming
Although the main hit from the loss of Seroquel is yet to come, group sales already fell 11% in the first three months, weighed down by wholesaler destocking of the drug, a tough year-ago comparison and generic competition for other drugs in Europe.
Bernstein analyst Tim Anderson summed up the results in an email headlined Ouch!, noting that Crestor, Seroquel and Nexium sales were all below forecasts and the performance in nearly all geographies was weak.
Sales in the quarter were $7.35bn generating “core” earnings, which exclude certain items, down 19% at $1.81 per share.
Analysts, on average, had forecast sales in the quarter of $7.92bn and earnings of $1.79/share, according to Thomson Reuters I/B/E/S.
AstraZeneca cut its forecast for full-year core earnings to between $5.85 and $6.15/share from $6.00-$6.30 previously and against $7.28 in 2011.
It also said revenues in 2012 would fall by a low- to mid-teen percentage rate, after previously predicting a low double-digit rate.