Amgen's $3 billion R&D operation is in for some changes. In a move analysts see as a likely herald of budget cuts, the company alerted its research staff that the world's biggest biotech was pondering ways "to improve focus and to re-allocate resources to key pipeline assets and activities." Now all they have to do is wait until Amgen's Q3 earnings call on October 24 to find out how they fit into this reconfigured R&D arm.
The classic--and sometimes controversial--measure used to calculate how much a drug developer should spend on R&D centers on cost of research as a percentage of income. At Amgen ($AMGN), that formula has attracted concern, as its $3 billion research budget amounts to a hefty 19% of its $15.1 billion in revenue. RBC Capital Markets analyst Michael Yee told Reuters that investors would like to see that trimmed back.
"The $3 billion R&D line item annually is high and investors see room to start to trim this," says Yee, who would like to see a smaller R&D expense and more cash for investors.
Amgen's executive team has been credited with building sales for the bone drug denosumab, but its flagship anemia drugs have been under pressure for years and will be among the first biologics to face major biosimilar competition. Amgen's R&D wing, though, hasn't been idle. A next-gen version of denosumab is in the clinic, Amgen bought out BioVex and its late-stage cancer vaccine in a billion-dollar deal earlier this year and the biotech partnered with Micromet on cancer in the summer.
The Ventura County Star, which broke the story, noted that Amgen went through a big restructuring four years ago that cost 2,000 jobs.