AstraZeneca was formed in 1999 when Sweden’s Astra AB and Britain’s Zeneca Group merged.N In 2017, the company had nearly 60,000 employees worldwide, working on pharmaceuticals for cancer, cardiovascular and metabolic disease, gastrointestinal ailments, infectious diseases, neuroscience, respiratory problems and inflammation.N Headquartered in Cambridge, England, AstraZeneca had three major R&D sites: one in Cambridge; another in Mölndal, Sweden, for research on traditional chemical drugs; and a third in Gaithersburg, Maryland, focused on biopharmaceuticals.
Since its formation, AstraZeneca had been one of the world’s largest pharmaceutical companies. From 2005 to 2014, AstraZeneca grew even larger through a series of acquisitions, including Cambridge Antibody Technology in 2006, MedImmune in 2007, and Spirogen in 2013.N In part, these deals were motivated by executives’ realization that AstraZeneca faced a “patent cliff” starting around 2012. AstraZeneca needed to get more products into its pipeline, because the patents on a number of its most successful drugs, including the cholesterol fighter Crestor and the heartburn treatment Nexium, were going to start expiring, meaning competitors could produce generic versions cheaply.N
And indeed, between 2011 and 2016, AstraZeneca saw a significant drop-off in both revenue and profit. Revenue declined from $33.6 billion in 2011 to $23 billion in 2016. Net income, meanwhile, fell from $9.9 billion in 2011 to $1.23 billion in 2014, before recovering somewhat to $3.5 billion in 2016. Headcount, which had stood at nearly 64,000 in 2009, contracted to 51,600 in 2013, before rising again.N
Taking the helm of AstraZeneca in October 2012, chief executive Pascal Soriot had to steer the company through the patent cliff and rebuild the drug pipeline through in-house research and acquisitions, while paring costs through divestments. Along the way, he faced challenges including a takeover bid from Pfizer in 2014. The deal, which valued AstraZeneca at nearly $120 billion, would have created the world’s largest drug maker.N In rejecting the deal, AstraZeneca Chairman Leif Johansson said the bid undervalued AstraZeneca and was driven primarily by “cost savings and tax minimization” concerns.
“AstraZeneca has created a culture of innovation, with science at the heart of its operations, which will continue to create significant value for patients, shareholders, and all stakeholders of AstraZeneca,” Johansson said in May 2014. “As an independent company, the entire value of AstraZeneca’s pipeline will accrue to our shareholders. Under Pfizer’s final proposal, this value would be significantly diluted.”N