Amgen ($AMGN) has concluded that its original plan to cut 12% to 15% of its global staff wasn't nearly as ambitious as it should have been. The big biotech put out the word today that it is now planning to chop 20% of its employee roster--a move that will shave up to 1,100 more jobs on top of the 2,900 layoffs already in the works.
Those staff cuts--which we already know will include its R&D campus in Seattle--are in addition to a move to eliminate about a quarter of all Amgen's facilities. And the Thousand Oaks, CA-based company is aiming to carve out $1.5 billion in expenses overall. In a filing with the SEC, Amgen noted that it will add 600 to 1,100 new job cuts to its reorganization plan, bringing the total job cuts to up to 4,000. A spokesperson for Amgen told FierceBiotech that she could not provide details on where the ax will drop next.
Amgen execs clearly intended to wow the analysts that showed up for its annual review on Tuesday, and they succeeded. In a note to investors ISI's Mark Schoenebaum says that the company is plotting a 15-point improvement on its operating margin--up to about 53% in 2018 from 37.3% in 2013.
Their message about deeper cuts may rattle staffers today, but it's exactly what Wall Street wanted to hear. Amgen's shares shot up about 5% as news of the deep cuts spread swiftly Tuesday morning. Helping that rally: Amgen will reinitiate share repurchases, with up to $2 billion planned through 2015.
Amgen has come under pressure from analysts and activist investor Dan Loeb to break up the company into more efficient pieces. ISI's Geoffrey Porges has offered a number of stinging reviews for Amgen, criticizing what he sees as a disjointed and unproductive pipeline strategy. A total of $30 billion in R&D spending over a decade, he points out, has netted $15 billion in added product sales. And the company has come under investor scrutiny for its high rate of R&D investing relative to revenue.
Amgen CEO Robert Bradway, though, clearly doesn't appear to be headed to a split. Instead he executed a $10.4 billion buyout of Onyx last year and has fostered a late-stage emphasis in R&D aimed at pushing new products into the market, following up with a downsizing move aimed at reining in costs.
Amgen execs also added some fresh details on its development plans for biosimilars. ISI's Mark Schoenebaum noted that Amgen says it is adding three more biosimilar programs to the 6 already in development, with plans to launch the first in 2017. Those 9 follow-ons have the potential to earn $3 billion-plus for the company, with average development costs of about $200 million per project.
As part of Amgen's R&D reorganization, research chief Sean Harper today highlighted an early and mid-stage partnering strategy that will concentrate on the company's core focus: inflammation and oncology, metabolism and bone, cardiovascular and neuroscience. R&D currently has four drugs under regulatory review: the cholesterol-lowering PCSK9 drug evolocumab, the heart drug ivabradine, blinatumomab and the cancer vaccine T-Vec. And Phase III data are expected on three additional programs by the end of this year, with Phase III rilotumumab data expected in 2015 and Phase III romosozumab data expected in 2016.
These new details from Amgen about its restructuring shouldn't be a complete surprise. The company noted in its Q2 earnings release that it was reviewing added steps to the restructuring. "As a next step," Amgen reported, "the Company is evaluating additional efficiency initiatives, particularly in the area of shared services and other external expense categories to support its growth objectives."
- here's the SEC filing
- here's the release