International
US biotech giant Amgen to cut 2,200-2,600 staff; Sustainability of delayed East Cork, Ireland plant project in question
By Finfacts Team
Aug 16, 2007, 07:32

Amgen is the world's top biotech company by sales. Originally founded in 1980 as AMGen (Applied Molecular Genetics), Amgen pioneered the development of novel and innovative products based on advances in recombinant DNA and molecular biology. More than a decade ago, Amgen introduced two of the first biologically derived human therapeutics, EPOGEN (Epoetin alfa) and NEUPOGEN (Filgrastim), which became the biotechnology industry's first blockbusters.

US biotech giant Amgen, on Wednesday  announced plans to reduce company staff by 12-14 percent and deliver other operational efficiencies while ensuring continued investment at industry-leading levels in research and development.

The cuts will be substantially completed by 2008 and yield pre-tax savings from prior plan of between $1.0 billion - $1.3 billion in 2008. Cumulative pre-tax restructuring charges associated with these changes are expected to be $600 million - $700 million in 2007 and 2008, which includes $289 million for asset impairment and related costs reported in the second quarter. The company also announced that adjusted earnings per share guidance for 2007 has been changed from $4.28 to a range of $4.13 - $4.23, excluding restructuring charges, due to lower Aranesp revenues. Adjusted earnings per share (EPS) guidance excludes restructuring charges, stock option expense, certain expenses related to acquisitions and certain other items.

Amgen has been hit by safety concerns and regulatory restrictions on its Aranesp' drug, which fhas seen sales fall by 19% to $578 million in the just ended second quarter from $713 million a year ago.

"At Amgen we have always been committed to investing in the future while squarely facing the challenges of today," said Kevin Sharer, Amgen's chairman and chief executive officer. "Recent changes in coverage rules and adjustments to Amgen's FDA approved labels for EPOGEN and Aranesp have and will adversely affect Amgen's revenue. The initiatives announced today respond to that new reality by taking account of reduced revenues and appropriately lowering costs across the company. We will continue to strongly support our research efforts directed at development of new medicines for grievously ill patients. These changes will also position Amgen for success in 2008 and beyond."

Last April, the company put plans for a $1 billion manufacturing center in Carrigtwohill, East Cork, Ireland on hold and revised expansion plans for manufacturing facilities in Puerto Rico.

Plans announced by the company to improve its cost structure include:

-- Reducing headcount by 12-14 percent, or approximately 2,200-2,600 staff;

-- Reducing planned capital expenditures by approximately $1.9 billion during the period 2007-2008, with a resulting improvement in cash flow;

-- Closing certain production operations and rationalizing other facilities to achieve improved efficiencies; and

-- Making choices about the highest priorities in research and development and operations that build the framework for future growth.

Founded in 1980 as AMGen (Applied Molecular Genetics), the company spearheaded the development of products based on advances in molecular biology that have enabled scientists to use living organisms manufactured inside living cells to create novel medicines.

In the late 1980's the company launched Epogen, one of the biotech industry's first blockbuster drugs, and more recently Aranesp. These anemia drugs treat nearly a million US patients with chronic kidney disease or cancer each year.

The drugs, which are reported to be the single biggest medication expense in the federal Medicare program, accounted for half of Amgen's $14.3 billion in revenue and 60% of its $2.95 billion in profit last year.