Amgen to slash 12% of jobs
Biotech giant Amgen Inc. said Wednesday that it was cutting 2,200 to 2,600 jobs as part of a sweeping plan to save more than $1 billion over the next year in an unprecedented biotech industry retrenchment.
The announcement at Ventura County’s largest private employer sent a shudder across the sprawling Thousand Oaks campus, where many employees huddled around computers and telephones, listening in silence as Kevin Sharer, the company’s chairman, chief executive and president, spelled out the bad news on a conference call with investors and industry analysts.
The cuts amount to 12% to 14% of the workforce and follow a string of recent clinical and regulatory setbacks for the company, particularly involving Aranesp, its top money-making drug last year, with sales of $4.1 billion.
Although there were no specific cuts spelled out for Thousand Oaks or elsewhere, the company said it would be closing production operations and reducing the size of other units.
Employees were wary afterward of speaking publicly, but privately they said the layoffs were expected but unwelcome. “It’s like an earthquake when you’re in California,” said a sales and marketing specialist who asked not to be named. “It’s not a surprise, but your heart sinks.”
About 8,600 of Amgen’s 20,000 employees work in Thousand Oaks, but it’s still too early to gauge the extent or local effect of the layoffs. High-paying, research-oriented white-collar jobs at companies such as Amgen are exactly the kind of jobs Southern California is seeking to attract.
In recent weeks, Conejo Valley residents and local businesses told The Times that they were anxious about looming layoffs and how they would affect a thriving local economy.
“These reductions will touch many families in our community,” Thousand Oaks Mayor Andy Fox said Wednesday in a statement. “The City Council, staff and our residents offer our compassion and support to all those affected.”
In announcing the move, CEO Sharer said, “The initiatives announced today respond to [our] 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.”
Mark Schoenebaum, biotech analyst at Bear, Stearns & Co., called the cuts difficult for workers but “undoubtedly the right thing for the company to do.”
Schoenebaum deemed the company’s actions a watershed moment for the biotech industry: “Job cuts like this have traditionally been the domain of larger pharmaceutical companies and not younger biotechs, but that’s obviously changed.”
Only a year ago, Amgen was at the top of the lucrative biotech world and enthusiastic about its prospects. Its anemia drugs, Aranesp and Epogen, and one by Johnson & Johnson were being used to treat anemia in nearly a million patients a year who had cancer or kidney disease.
But starting in late 2006, a series of research studies, including one by Amgen, found that its anemia drugs might be dangerous in certain doses and patients.
The response from regulators was swift and severe. In the spring, the U.S. Food and Drug Administration added a new “black box” warning on the drug’s label.
On Aug. 1, the U.S. Centers for Medicare and Medicaid Services followed with an unexpected blow when it announced plans to severely restrict reimbursement for the drugs.
Sales plummeted. Amgen announced last month that sales of Aranesp domestically fell 19% to $578 million in the second quarter, and the company’s stock has fallen to a nearly four-year low.
Meanwhile, the company faces another challenge next month when the FDA meets to discuss possible further changes to the drug’s label.
As a result of the restructuring, Amgen plans to take pretax charges of $600 million to $700 million in 2007 and 2008, which includes charges of $289 million for asset impairments taken in the second quarter of 2007.
It also lowered its 2007 forecast, saying it now saw adjusted earnings per share, excluding restructuring costs, coming in at $4.13 to $4.23, down from its previous guidance of $4.28.
Shares of Amgen rose 77 cents, or 1.5%, to $51.36 in after-hours trading Wednesday. Earlier in the day, the stock fell 73 cents to $50.59 in regular trading.
Sharer left open the possibility of further cuts: “If we’ve got to do more, we will and we can.”
On Wednesday, the scene at the Alamo Bar and Grill in Thousand Oaks, a popular Amgen employee hangout, was somewhat grim. Several workers said they worried they could be one of the many out of work in the next few months. Said Alamo bartender Lisa Kirchhoff, “They all knew it was coming.”
--
andrea.chang@latimes.com
