No More Rumors: Amgen Slashing $2 Billion Capital Investments and 2,500 Employees

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas) -- The rumors started multiplying on industry insider websites earlier this year, all hinting that that Big Bio Amgen (NASDAQ:AMGN)(South San Francisco, California) was preparing to initiate massive layoffs and would scrap a number of major capital projects. The early signs were there, including putting its highly vaunted $1 billion Cork, Ireland project on ice, or in the company's words “...rescoping...” But they ceased being rumors as the questions moved from the bloggers to Amgen's announcement that in response to the twin dragons of poor sales and health alarms surrounding its anemia drugs, Aranesp and EPOGEN, it would shed nearly 15% of its employees and cancel nearly $2 billion worth of capital projects. It is a page out of Big Pharma's playbook that the biggest biotech company in the world did not expect or desire to read.

Click on the image at right to view a list of Amgen’s projects.

Like its other Bio brethren, Amgen has been in an active growth mode over the past decade. Boasting revenues last year of $14.5 billion, huge global investments in new research and manufacturing facilities mirrored the company's optimism over the future. Already concerned with the dismal second quarter sales of Aranesp – a 19% drop to $578 million in the just ended second quarter from $713 million a year ago – Amgen was broadsided by Medicare's July decision to sharply cut reimbursement of the drug. Recent reports regarding its very first product Epogen, which is used in the treatment of anemia in cancer patients, indicated that overuse of the drug could prove extremely harmful, possibly to the point of premature death, forced the company to swiftly find a paddle and change direction.

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 U.S. patients with chronic kidney disease or cancer each year. The drugs, reportedly the single biggest medication expense in the federal Medicare program, accounted for half of Amgen's $14.5 billion in revenue and 60% of its $2.95 billion in profit last year. Instead of cutting its sales force, the majority of Amgen's job cuts will be from manufacturing and research. Hoping to save over a $1 billion in 2008 with the moves, Kevin Sharer, Amgen's Chairman and Chief Executive Officer, issued a statement saying in part "...We will continue to strongly support our research efforts directed at development of new medicines for grievously ill patients.”

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