AstraZeneca (AZN - Analyst Report) announced that it will reduce its US sales force by approximately 24% or 1,150 employees. The company’s decision to cut its sales force is in line with its strategy of improving efficiency and delivering better results.

Employees in leadership positions as well as sales representatives will be affected by the job cuts. Though the job cuts will be finalized by early February 2012, employees have the option to self-identify and leave AstraZeneca.

The layoff decision comes with an associated cost of $50 million – $100 million, which will be charged in the fourth quarter of 2011. These costs will not impact AstraZeneca’s core financial measures. The company maintained its core earnings guidance range of $7.20 – $7.40 per share for 2011.

These changes were not included in AstraZeneca’s previously announced restructuring program. In the first phase of the restructuring program, the company achieved annual benefits of $2.4 billion by the end of 2010 at a cost of $2.5 billion incurred between 2007 and 2009.

The ongoing second phase of the restructuring program was announced in January 2010. In this phase, AstraZeneca aims to deliver additional annual savings of $1.9 billion by 2014 at a cost of $2 billion.

Our Recommendation

We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Even though we are encouraged by the strong cardiovascular franchise at AstraZeneca and the company’s focus on the high-potential emerging markets, we remain concerned about the generic competition faced by its key products. The job cuts are a part of the company’s cost-cutting initiatives in the face of increasing generic competition.