Amgen announced initiatives that will reduce company staff by 12-14 percent and deliver other operational efficiencies while ensuring continued investment at industry-leading levels in research and development.
These initiatives 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 restructuring illustrates how big biotechnology companies, ballyhooed for their nimble management and entrepreneurial cultures, can become vulnerable to the same challenges that have humbled their Big Pharma cousins: the need to broaden their product lines, stage large clinical trials and cope with post-market surveillance of their hit drugs",- writes the Wall Street Journal.
The trigger for the restructuring was a very "patient unfriendly" Medicare coverage decision, 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(R) 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."
Sharer, as quoted by WSJ, termed both the regulatory pressures and the restructuring as unprecedented in the history of the company or the biotech industry, which Amgen helped found three decades ago with the goal of treating disease with natural proteins.
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.
About Amgen
Amgen discovers, develops and delivers innovative human therapeutics. A biotechnology pioneer since 1980, Amgen was one of the first companies to realize the new science's promise by bringing safe and effective medicines from lab, to manufacturing plant, to patient. Amgen therapeutics have changed the practice of medicine, helping millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis and other serious illnesses.
Learned from Amgen's web site, WSJ
