On the same day the drugmaker’s stock hit a new 52-week low over pipeline concerns, AZ is looking at cutting inventory in order to free up cash. Reducing the number of days of stock held is among a number of options being considered as the group’s head of operations, David Smith, studies ways to maximize financial returns, Reuters reports.

Such a move would mark the latest step by AstraZeneca to bolster its profitability, following a series of product setbacks since 2004. AZ is already cutting thousands of jobs and outsourcing some manufacturing overseas to such places as China. “AstraZeneca has not issued definitive guidance around inventory outstanding days although we are focussed on improving inventory terms as part of our overall strategic approach to improve efficiencies and cost effectiveness of our supply chain and operations area,” a spokesman tells Reuters.

Drugmakers typically keep a high level of inventory - around six months worth of supply - as a backup because running out of vital meds is commercially and ethically unacceptable. But analysts at Citigroup wrote in an investor note there is margin to maintain lower inventory levels and predicted AZ was likely to reduce its days of inventory outstanding from the traditional 180 days to 90.

“We believe that if AstraZeneca took this move, its peers would have a hard time defending not taking similar action,” they wrote, and added AZ is already considered to be the leader among drugmakers when it comes to cash management, according to Reuters. “We believe this is likely to drive similar moves across the rest of the sector.”

The move may be well received by investors if cash released is used to raise capital returns to shareholders. But then there’s that notion of maintaining a minimum supply of needed meds. Avoiding shortages, patient setbacks and bad publicity will require some deft management.

Source: Reuters