Astra AB

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Astra AB

S-151 85 Södertälje
Sweden
46 (8) 553 260 00
Fax: 46 (8) 553 290 00
Web site: http://www.astra.com

Public Company
Incorporated:
1913
Employees: 20,000
Sales: SKr39 billion (US$5.4 billion) (1996)
Stock Exchanges: Stockholm London New York
SICs: 2835 Diagnostic Substances; 2834 Pharmaceutical Preparations; 5047 Medical and Hospital Equipment

Astra AB is the leading pharmaceutical company in Scandinavia. Long recognized by the Swedish scientific community for its strong emphasis on research and development, the company burst onto the international scene in the early 1990s with a new leader, Håkan Mogren, and an aggressive new marketing strategy. The CEO has been credited with transforming Astra from a cautious, slow-moving outfit into a true global player. Sales multiplied from SKr 6.1 billion in 1988, Mogrens first year at the helm, to SKr38.4 billion in 1996. By this time, Astras drug portfolio included the worlds bestselling drug, the peptic ulcer treatment Losec (known as Prilosec in the United States), which alone generated US$3.5 billion in annual sales. Other drugs in the companys stable included Naropin, a derivative of the local anesthetic Xylocaine; anti-asthma drugs Pulmicort and Oxis (as well as a CFC-free delivery device, Turbuhaler); and the Plendil heart treatment. Though Europe accounted for well over half Astras revenues, the United States was its biggest single market.

Early Twentieth-Century Origins

Prior to 1913 Swedish law limited the manufacture of pharmaceuticals to registered apothecaries. With the ratification of an amendment to the statute in 1913, it became possible for industrial companies to manufacture drugs. Astra was formed by the initiative of more than 400 doctors and apothecaries who joined together to establish the company and to become its first shareholders.

Principal among these early participants were a number of accomplished men who also assumed leadership positions in the new company. Prof. Hans von Euler, who was later to be the recipient of the 1929 Nobel Prize in Chemistry, joined Astra as its scientific adviser. Dr. Adolf Rising, a former employee of Ciba, the Swiss pharmaceutical concern, became Astras first production manager. Dr. Sven Carlsson, owner of another Swedish company, provided financial support and secured a production site, a factory managers house in Södertälje. Carlsson eventually assumed the chairmanship of the company.

Two productsDigitotal, a heart medication, and Glukofos, a nutritional supplementemerged from Astras facilities in 1914, and the company began to prosper. When the apothecary Hjalmar Andersson Tesch joined Astra in 1915 as the companys new president he brought with him a number of his own Pharmaceuticals; Astras product line now comprised a variety of medicines and chemical compounds. Government wartime restrictions on imports created a demand for Astras products, and the company bought new factory buildings to meet that demand. By the end of World War I Astra was reporting handsome profits.

Interwar Difficulties

The years following the war proved less successful. In an attempt to create a company of international stature, the Swedish chemical company AB Svensk Fargamnesindustri acquired Astras entire capital stock. The directors of Svensk incorrectly assumed that the shortage of raw materials during the war would persist in the postwar years. They invested in equipment for the manufacture of artificial sweeteners (a lucrative product for Astra during the war) and acetylsalicylic acid, the chemical base for aspirin. But prices for raw materials dropped as war shortages disappeared. The company faced imminent bankruptcy as its manufacturing costs grew larger than the prices its products could command in the marketplace.

A solution seemed possible when Swedens first socialist government announced plans to create a nationalized pharmaceutical monopoly. Despite harsh criticism from the apothecaries, the press, and opposition members of parliament, the government authorized the state liquor monopoly to purchase Svensk Fárgámnesindustri. Dr. Ivan Bratt, former leader of that monopoly, became Astras new chairman, and the company seemed ready to assume a major role in the proposed pharmaceutical monopoly. Yet, within months, the socialist government fell, and its successor was staunchly opposed to the new monopoly. From 1921 until 1925 the government sought a private buyer who would release the state from its responsibilitieseven the employees of Astra were approached as potential buyers. A purchaser was finally found in the form of a private consortium, and Astra became an independent company once again. Meanwhile, Astras running deficit had cost the state millions of kroner.

The companys new board members included Erik Kistner and Richard Julin, a merchant and a banker respectively, whose business acumen helped to stop Astras seemingly endless losses. In 1927 Birje Gabrielsson became company president; he remained in this position until 1957. The new hierarchy reorganized many of Astras operations. The most important of these changes allowed for the formation of the companys own distribution network. In just a few years the company was again profitable.

With the establishment of research and development facilities in the 1930s, Astra began to create more innovative products. Hepaforte, marketed in 1937, offered treatment for sufferers of pernicious anemia. Another important drug to emerge from Astras laboratories was Nitropent, a medication for angina pectoris.

Astras growth during the years prior to World War II resulted not only from its development of new products but also from its aggressive expansion and acquisition strategy. By 1940, company subsidiaries were operating in Finland, Latvia, Stockholm, and Hässleholm.

Restricted imports and shortages of raw materials during World War II placed Astras products at a premium, and once again profits increased. The company constructed a new modern central laboratory and established a subsidiary to supervise the management of, and distribution to, Astras numerous branch offices. The company established new subsidiaries in Denmark, Argentina, and the United States.

Development of Xylocaine Spurs Post-World War II Growth

In the postwar years a number of successful Pharmaceuticals emerged from Astras laboratories. Ferrigen, an iron preparation, and Sulfadital, a sulfa medication, were two products of many that were well received in the marketplace. The most important of all Astras products developed during this period was Xylocaine, a local anesthetic that even today remains one of Astras most popular products. Yet Xylocaine might never have happened if it had not been for Astras strong relationship with the academic community and its commitment to research.

In 1943 two chemists from the University of Stockholm, Nils Lofgren and Bengt Lundqvist, approached Astra with a discovery they thought worth further investigation. The chemists had offered their compound to other companies, but only Astra demonstrated the ultimate interest of financial support. After five years of clinical testing in Astras laboratories, Xylocaine appeared on the market, and its immediate success confirmed the chemists and Astras belief that they had produced the best local anesthetic available. Xylocaines quality was soon recognized in foreign markets as well, and Astras reputation as one of the worlds most important pharmaceutical manufacturers grew accordingly. By 1984, local anesthetics constituted 24 percent of Astras total group sales, with Xylocaine alone contributing SKr 696 million.

Company Perspectives:

Our Vision. Astras values and way of working make it a special company. Established in 1913 in the small town of Sodertalje, Stockholm, Astra today is hardly recognizable from its early origins. Yet many of the values that characterize Astra remain fundamentally the same. These include: a commitment to excellence and safety; a strong belief in research; an enterprising, innovative spirit; an emphasis on hard work, and respect for the individual.

This has proved to be an enduring formula for success. At the same time, the world is changing rapidly. Only the best will continue to prosper and grow. If we want to stay successful we will have to set new goals and take on the challenges of a dynamic future. Our vision can be summarized in four main points: To Stay a Step Ahead. Reductions of health-care spending and rising research costs will force many companies out of the market. Only the best companies will survive and Astra intends to remain one of them, through strength in research, with first-rate products and excellent people. To Expand our Global Influence. Astra aims for the top. This means that we will need to continue expanding our influence and attain leading positions in many more markets by the turn of the century. To be Better Where we are Already Good. Building on our core business is the right strategy for the immediate future. We should aim at being worldwide leaders in our chosen therapeutic areas by the year 2000. Individual Performance is the Key to Our Long-Term Success. Our future is critically dependent on the skills, motivation and commitment of Astras staff. Astra s rapid expansion presents a major management challenge. We must continue recruiting high-caliber, skilled employees.

The worldwide production of Xylocaine began in earnest during the 1950s, and during that decade Astra broadened its overseas activities with an international network of subsidiaries and foreign licensees. Domestically, Astra consolidated its holdings to forestall the problems usually associated with quick growth, overhauled its pharmaceutical line to remove any unprofitable products, and confined all drug manufacturing to the Sodertalje plant. The company continued to modernize its facilities and increase the size of its sales organization. By far the most important of Astras measures during this period was its significant increase in research and development spending. As a result of this commitment, the company produced a number of successful new products throughout the 1950s, including Secergan (an anti-ulcer medication), Ascoxal (a treatment for oral infections), Jectofer (an injectable iron preparation), and Citanest (another local anesthetic).

Global Expansion in 1960s, 1970s

Throughout the 1960s Astra continued to expand both at home and abroad. The company acquired a manufacturer of nutritional products and a distributor of medical supplies. It created and built new operations in Western Europe, South and Central America, and Australia. It joined with Englands Beecham Research Laboratories in an attempt to develop synthetic penicillins. By 1983, 80 percent of Astras sales were generated from overseas markets.

By the 1970s Astras diverse activities required the company to form separate divisions. In addition to the variety of drugs developed in the past, the pharmaceutical division now manufactured cardiovascular and anti-asthmatic drugs. The chemical products division produced agricultural products, nutritional products, cleansers, and recreational items. The varia division was responsible for medical equipment and rust prevention products. By the end of the decade, however, Astra announced that it would henceforth concentrate solely on the production of Pharmaceuticals and, as a result, the company sold all of its other holdings.

Re-Emphasis on Pharmaceuticals in 1980s

With a renewed commitment to the manufacture of pharmaceuticals, Astras unique and highly efficient research units emerged as the companys strongest assets. One notable pharmaceutical to emerge from Astras laboratories in the 1980s was Seloken, now a very successful medication for heart disease. By 1984 Astras three most important productsSeloken, Xylocaine and Bricanyl (a bronchodilator)grew to generate over half the companys revenues; specifically, Seloken would become Astras best-selling drug as well as one of the best-selling medications in the world.

The development of several new drugs to treat viral infections, gastrointestinal agents, and the central nervous system helped propel Astras pre-tax earnings over the one billion kroner mark in 1985. Sales of the asthma drug Pulmicort helped propel total revenues to over SKr6.2 billion in 1988, by which time pre-tax earnings had risen to SKrl.5 billion.

Though Astras financial performance was beginning to attract the attention of investors around the world, a core group of stockholders remained dissatisfied. Swedens well-to-do Wallenberg family, which owned a 10 percent stake in Astra, launched a search for a replacement for CEO and President Ulf Widengren. In 1988, they hired an unlikely candidate: 44-year-old chocolatier Hákan Mogren. Mogren turned the companys former marketing program on its head, rescinding licenses and instead beefing up Astras own distribution and sales organization. He established subsidiaries where there had previously been licensees, and added nearly 1,000 sales representatives worldwide by the end of 1990. Mogren also led a fundamental shift in the corporate culture. As he told Forbes magazines Richard Moráis in 1997, We had to turn from an inferiority complexwhere we licensed out [drug inventions]to self-confidence and the ambition to be a true global player. It was an emotional change.

Mogren chose a tough market for his first outing, launching the anti-ulcer drug Losec in competition with Glaxo Pharmaceuticalss best-selling Zantac. The battle between these two drugs was waged in doctors offices and regulatory agencies as well as research labs, as salespeople, lobbyists, and scientists from the two companies dueled for sales and market share. Fortunately, Astra enjoyed a close relationship with longtime U.S. distributor Merck, which became an important ally in the competition, playing an especially vital role in convincing the U.S. Food & Drug Administration to approve Losec as a first-tier ulcer treatment. In his first two years at the helm, Mogren boosted sales by nearly 50 percent, from SKr6.3 billion to SKr9.4 billion, and increased pretax earnings by SKrl billion. It was only the beginning.

Transformation Under Mogren in Early 1990s

The new leader intensified his transformation of Astra in the early 1990s, propelling the company into the ranks of the pharmaceutical industrys fastest growth vehicles. Mogren more than doubled the sales force from about 3,000 in 1990 to nearly 7,000 by mid-decade and boosted the companys roster of subsidiaries to 40 nations worldwide. These assertive moves succeeded in increasing the companys sales and income at a truly astonishing rate. Total sales quadrupled, from SKr9.4 billion in 1990 to nearly SKr39 billion in 1996, while pre-tax net mushroomed fivefold, from SKr2.5 billion to over SKrl 3 billion. Though the employee roster burgeoned from about 8,800 to nearly 20,000 during the period, productivity at the self-confident multinational grew even faster. As measured in terms of annual sales per employee, productivity doubled from SKrl million to SKr2 million.

Losec became the worlds top-selling drug in 1996, with an estimated 200 million prescriptions and US$3.5 billion revenues. Astra hoped to double the drugs market share by the end of the 1990s. But with the ulcer treatments patents nearing expiration (termination dates ranged from 2001 in the United States to 2010 in other nations), Astra ramped up its research and development budgets from less than SKr2 billion in 1990 to over SKr7 billion in 1996. The investments paid off with six new pharmaceuticals scheduled for launch in 1997, including the Oxis Turbuhaler asthma treatment; Naropin, a derivative of Xylocaine that merged a local anesthetic with painkilling qualities; MUSE, a treatment for impotence; and the anti-hypertensive Atacand. While continuing to pursue its historically successful drug derivation strategy, Astra also aimed to add new therapeutic concentrations to its repertoiregastrointestinal, respiratory, cardiovascular, pain control, anti-infective, and central nervous systemby 2010.

Principal Subsidiaries

Astra Arcus AB; Astra Draco AB; Astra Hássel AB; Astra Pain Control AB; Astra Pharmaceutical Production AB; Astra Production Ctíemicals AB; Astra Production Liquid Products AB; Astra Production Tablets AB; A.S.P. S.A. (France); Astra S.A. Productos Farmacéuticos y Químicos (Argentina); Astra Pharmaceuticals Pty Ltd. (Australia); Astra Ges.m.b.H. (Austria); N.V. Astra Pharmaceuticals S.A. (Belgium); Astra Química e Farmacéutica Ltda. (Brazil); Astra Pharma Inc. (Canada); Astra (Wuxi) Pharmaceutical Co. Ltd. (China); Astra Danmark A/S (Denmark); Suomen Astra Oy (Finland); Laboratoires Astra France; Astra GmbH (Germany); Astra Hellas S.A. (Greece); Astra Pharmaceuticals (HK) Ltd. (Hong Kong); Astra Pharmaceuticals (Ireland) Ltd.; Astra Farmaceutici S.p.A. (Italy); Astra Japan Ltd.; Yoshitomi-Satra Ltd (50%); Astra Luxembourg S.A.R.L.; Astra Pharmaceutical (Malaysia) SON BHD; Astra Mexico S.A. de C.V.; Astra Pharmaceutica B.V. (Netherlands); Astra Pharmaceuticals (New Zealand) Ltd.; Astra Norge AS (Norway); Astra Pharmaceuticals (Philippines) Inc.; Astra Protuguesa Lda; Astra Pharmaceuticals (Singapore) Pte Ltd.; Astra Korea Ltd. (South Korea); Laboratorio Astra España, S.A.; Astra Lakemedel AB; Draco Lakemedel AB/Tika Lakemedel AB; Hassle Lakemedel AB; Astra Pharmaceutica AG (Switzerland); Astra Pharmaceutical (Taiwan) Ltd.; Astra (Thai) Ltd.; Astra Pharmaceuticals Ltd. (United Kingdom); Astra USA, Inc.; Astra Export & Trading AB; Astra Pharmaceuticals, s.r.o. (Czech Republic); Astra Pharmaceuticals Kft. (Hungary); Astra Pharmaceuticals (Poland) Sp.z.o.o.; Astra Pharmaceuticals (Pty) Ltd. (South Africa); Astra Tech AB. Principal Affiliates: Astra Merck, Inc. (United States) (50%); Astra-IDL Limited (India) (26%).

Further Reading

Astra Adds Muscle in the U.S., Business Week, November 14, 1994, p. 47.

Blackledge, Cath, Glaxo/Astra Plot Courses for Success, ECN-European Chemical News, November 20, 1995, pp. 26-27.

Blanton, Kimberly, New Astra CEO Makes Changes, Boston Globe, May 14, 1996, p. 39.

Harassment Suit Against Astra Chief Is Dismissed, New York Times, May 29, 1997, p. D3.

Moore, Stephen D., Astras Successful Ulcer Drug May Become Bellyache, The Wall Street Journal, November 26, 1996, p. B4.

Moráis, Richard S. The Confidence Man, Forbes, May 5, 1997, pp. 116-17.

Stevenson, Richard W., A Certain Glow on Swedens Astra, New York Times, November 22, 1992, pp. 3-13.

Too Much Acid, The Economist, March 30, 1991, pp. 82-83.

updated by April D. Gasbarre