Europe March 2, 2010, 7:51AM EST

AstraZeneca Chief Talks Pharma Challenges

The American CEO of the Anglo-Swedish drug giant faces daily demands, ranging from layoffs and R&D problems to patent protection and the U.S. healthcare plan

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David Brennan is a man with many demands on his time. Not only is he chief executive of AstraZeneca (AZN), one of the world's biggest pharmaceutical companies, but the group he leads, and the industry he is part of, faces some of its biggest challenges for a generation.

On any given day, Mr Brennan, a tall and softly spoken American, could be dealing with a challenge to the patent protection on the company's best-selling drugs, answering calls from the White House about Barack Obama's struggling healthcare reforms, or explaining to staff why 8,000 of them are going to lose their jobs over the next five years as part of AstraZeneca's recently announced restructuring plans.

Unlike most of those who make it to the chief executive's chair in the pharmaceuticals industry, Brennan is a salesman. Indeed, he is only the one of his peers in the world's top five drugs makers to have come through the sales division of the business. But the salesman's sharp tongue may serve him well in the coming years.

First in his in-tray is AstraZeneca's unimpressive recent performance at introducing new drugs. Mr Brennan admits: "We haven't been as productive as we would have liked to have been in the last few years and, for a pharmaceutical company, that's pretty significant, right? I would like to see sustainable delivery on a consistent basis from our research and development organisation, and that's why they have been set a goal. From the beginning in 2010, on average, we will bring two new products to the market each year. That's our goal and what I want to be measured against."

Cynics, even some from within his own company, may argue that cuts to the group's R&D arm may go some way to explaining why its performance has disappointed. When the Anglo-Swedish group's revealed its full-year results at the end of January, Mr Brennan announced that 8,000 staff, largely from the research unit, would be made redundant over the next five years, in addition to the 12,600 that have departed since 2007.

"Big pharma" is changing and devoting fewer resources to scientists, for various reasons. Drugs companies have woken up to the idea of licensing agreements, where they can pay smaller biotechnology companies to develop potential treatments at a fraction of the cost. This month, AstraZeneca signed a deal for a rheumatoid arthritis drug developed by Rigel Pharmaceuticals (RIGL), which, even if it becomes a top seller, will cost a maximum of $800m, much less than AstraZeneca would have spent developing its own treatment.

But the biggest problem by far is the competition posed by generic drugs firms. A host of companies are increasingly turning to the courts to challenge intellectual property rights that the likes of AstraZeneca have depended on to guarantee a competition-free market. Analysts believe AstraZeneca is likely to be one of the worst hit in the coming years. Mr Brennan concedes that the loss of exclusivity on the breast cancer drug Arimidex and the asthma medicine Pulmicort Respules will squeeze revenues, but is confident it will grow market share in other medicines.

Despite accepting that generic competition is now an established feature of the industry, Mr Brennan denies AstraZeneca's defence of its patents in the courts is akin to King Canute trying to stop the tide.

"You see us in court when we are challenged – it's a defensive strategy," he says. "We defend our intellectual property when generics choose to challenge it. About 10 years ago, the generics changed their strategy and decided to challenge every patent, so what you're seeing is a shift from them. They are saying, 'let's get the top 20 drugs and start challenging them. We only need one patent and we've made lots of money'."