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.
Sales fell 11 percent in the first quarter, missing expectations as key products disappointed, and underlying earnings dropped 19 percent, highlighting the group’s need to find new sources of growth as multiple drug patents expire.
AstraZeneca has recently stepped up its pace of deal-making, to bring in more promising new drugs from other companies, but Brennan, 58, has been under fire from some investors for not acting sooner.
Brennan will be replaced on an interim basis by Chief Financial Officer Simon Lowth, 50, 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 chairman on June 1 – three months earlier than planned – and will become chairman of the nomination and governance committee after the annual meeting later on Thursday.
By taking up his new job early, the former Volvo boss will take charge of the hunt for Brennan’s replacement. An AstraZeneca spokeswoman said headhunters Spencer Stuart had been appointed to help with the search.
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 U.S. 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 that strategy 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 U.S. biotechnology company MedImmune for $15.6 billion was slammed at the time and has been criticized 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 $1.26 billion and a collaboration with Amgen.
“After more than six years as Chief Executive Officer 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 in a statement.
Although the main hit from the loss of Seroquel is yet to come, group sales already fell 11 percent in the first three months, weighed down by a tough year-ago comparison and generic competition for Nexium and other drugs in Europe.
Bernstein analyst Tim Anderson summed up the results in a note with the simple headline “Ouch!”, noting that Crestor, Seroquel and Nexium sales were all below analyst forecasts and the performance in nearly all geographies was weak.
Shares in the company fell 3.5 percent by 07:30 GMT.
Sales in the quarter were $7.35 billion, generating “core” earnings, which exclude certain items, down 19 percent at $1.81 a share.
Analysts, on average, had forecast sales in the quarter of $7.92 billion and earnings of $1.79 per 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 a share from $6.00-$6.30 previously and against $7.28 in 2011.