LONDON (Reuters) - AstraZeneca (AZN.L) has picked former Volvo boss Leif Johansson as its next chairman, hoping his experience of steering the truckmaker through tough times will help at a drugmaker facing shrinking revenues and a weak pipeline of new drugs.
The 60-year-old Swede was chief executive of world number two truck maker Volvo (VOLVb.ST) for 14 years and his arrival at AstraZeneca follows a trend among drugmakers seeking lessons from the auto industry on leaner, meaner production.
Johansson cut his teeth in the Big Pharma sector with three years as a non-executive director at Bristol-Myers Squibb (BMY.N) until 2011, but was most recently chairman of the world’s top mobile network equipment maker Ericsson (ERICb.ST), a job he took up barely a year ago in April 2011.
AstraZeneca faces loss of exclusivity on many of its top-selling drugs over the next five years and has few obvious replacements in its pipeline.
The Anglo-Swedish drugmaker is cutting a further 7,300 jobs and expects earnings to fall 14-18 percent this year as patents on key drugs expire and governments in Europe and the United States squeeze prices.
The appointment gives AstraZeneca shareholders one less thing to fret about amid concerns the firm’s management is running out of ideas to spur growth, raising the prospects for another unpopular, expensive takeover like its more than $15 billion MedImmune deal in 2007.
“Leif sounds a very credible chairman on paper. Let’s hope he gets some strategic impetus into Astra,” one top 10 shareholder told Reuters.
AstraZeneca said Johansson would be proposed for election as a non-executive director at a shareholder meeting on April 26 with a view to appointing him non-executive chairman from September 1 when the incumbent Louis Schweitzer will retire.
Schweitzer, who also has a history with Volvo and with French carmarker Renault (RENA.PA), said Johansson was “an outstanding businessman with a first-class track record leading multinational companies, as well as previous experience of the pharmaceutical industry.”
Johansson’s family has long been part of Sweden’s business elite - his father was head of SKF (SKFb.ST), the world’s top bearings maker.
His final years at Volvo were dramatic, with the truck maker briefly slipping into the red and cutting thousands of staff as the vehicles market suffered its worst plunge in decades in the wake of the global financial crisis.
Johansson faced some criticism for his handling of the crisis, but market demand as well as Volvo’s share price recovered rapidly in his final months, laying to rest much of the scepticism.
He comes to AstraZeneca as the world’s big drugmakers are under pressure to streamline operations in the face of rising costs and slowing sales, and are increasingly looking to the automotive industry for tips.
While fast cars, big trucks and drugs may appear to have little in common, analysts say executives are starting applying the lessons of lean car production systems and fragmented value chains to the world of pharmaceuticals.
Mike Mitchell, an analyst at Seymour Pierce in London, said choosing Johannson would allow the drugmaker to focus on future challenges and appeared to make sense.
“Undoubtedly, beefing up boards with individuals who have seen industries really feel the squeeze - and the auto industry is certainly one of those - makes sense for an area like pharma which is undergoing its own trials,” he told Reuters.
Astra’s second biggest-selling drug, the antipsychotic medicine Seroquel, will lose exclusivity in the United States this month and also goes off patent in European countries this year. That will contribute to a tough year, with group sales expected to decline by a low double-digit percentage in 2012.
Concerns about AstraZeneca’s future have grown since a double blow to its new drug pipeline in December when it scrapped an ovarian cancer drug and took a big writedown on an antidepressant being developed with Targacept TRGT.O.
Its existing cardiovascular business is also uncertain, with new drug Brilinta off to a slow start and cholesterol fighter Crestor facing more competition following the arrival of cheap generic copies of Pfizer’s (PFE.N) market-leading Lipitor.
Additional reporting by Simon Johnson in Stockholm, and Sinead Cruise in London; Editing by Mike Nesbit and Mark Potter