Amgen’s troubles loom large over hometown
In Thousand Oaks, Amgen Inc. rules.
It’s the biggest private employer in town. Its 8,300 local employees, known as “Amgenites,” make an estimated average annual salary of $162,000. Its sleek corporate headquarters with sweeping views of the Santa Monica Mountains looks more like a college campus, and frequent late-afternoon “fermentation parties” offer free beer for all.
In this city of nearly 127,000, the biotech giant and its well-heeled workforce have kept the area’s economy humming -- including a new Four Seasons hotel nearby that opened in November, gourmet restaurants and hip boutiques that sit among its rolling hills and 4,000 oak trees, some more than 300 years old.
But is the party ending? This summer, things are increasingly looking glum at the once go-go Amgen.
After studies have raised safety concerns about two of Amgen’s bestselling drugs, U.S. sales of its most profitable product, Aranesp, fell almost 20% last quarter. Regulators are issuing new warnings and investors are pummeling the stock, which has lost nearly a quarter of its value since the start of the year and fallen to its lowest level in nearly four years.
Last week, the U.S. Centers for Medicare and Medicaid Services dealt an unexpected and serious blow to the company when the government announced plans to limit what dosages of anemia drugs it would pay for under Medicare. Included was Amgen’s Epogen and Aranesp medications, which made up 60% of the company’s profit last year.
Worse yet, layoffs may loom. Although plans have not been finalized, the company is expected to announce it is reducing its workforce by as much as 15% in the next several weeks, according to three people familiar with the matter.
The company, however, says layoff talk is premature.
“We have made no announcements regarding staff reductions,” Amgen spokesman David Polk said.
Amgen has already delayed plans for a new $1-billion plant in Ireland and has slowed manufacturing operations elsewhere. Many contractors and temporary workers have left the company in recent months and employee overtime has been curtailed, those familiar with the matter say.
Mark Shoenenbaum, a biotech analyst at Bear Stearns Cos., said that if pressure on Amgen continued to mount, it might have few choices but to cut expenses further. “There’s likely fat in places they can find,” he said.
Last week, Chief Executive Kevin Sharer left a general message to employees on the company’s voicemail system indicating there may be upcoming changes. Some workers said privately that they considered the message ominous.
Anonymous postings by nervous Amgen employees on websites such as www.cafepharma.com and www.medzilla.com are filled with workers searching for clues. One message left July 30 said, “Does anyone have more recent information regarding the departments that will be impacted by the layoffs? I know it has started and it is a scary time to be at Amgen.”
In recent months, Amgen executives have said the company can weather the current pressure on its top-selling products. Executives say several promising products are under development, including late-stage trials for an osteoporosis drug and others that would treat cancer, that could be on pharmacy shelves in the next few years.
Acting more like a large pharmaceutical company than a nimble homegrown biotech, it has also recently acquired smaller companies that it hopes hold promising technologies.
Wealth and fame are no strangers to Thousand Oaks and the surrounding areas that rose up disproportionately on Amgen’s back. The area is home to five Fortune 500 companies, including home builder Ryland Group Inc. and lender Countrywide Financial Corp., which are both struggling with the current real estate downturn, and Dole Food Co.
New upscale restaurants and cocktail lounges packed with workers have popped up in formerly sleepy locales, and the area’s first Nordstrom department store arrives next year. Will Smith and Wayne Gretzky have had homes nearby, and Tiger Woods hosts an annual golf tournament at the tony Sherwood Country Club golf course.
Locally, however, Amgen employees’ anxiety is beginning to be felt.
Howie Neftin, owner of Neftin Westlake Car Co., says two Amgen employees recently canceled orders for matching Volvo S40s, valued at more than $30,000 each. He worries that it could be just the beginning.
“I’m sure what happens there is going to affect a lot of us,” Neftin said.
Hyo Shin, owner of Ventu Park dry cleaners on the edge of Amgen’s main campus, said sales fell 15% in July compared with a year earlier, to $24,000.
Said Shin, who estimates a third of his business comes from Amgen employees, “People who used to bring in $200 a month are dropping off $150 instead. It adds up.”
“A lot of us that live here realize that Amgen has been the backbone of Thousand Oaks without a doubt,” said Rob McAfee, president of the Conejo Valley Little League, which plays on what locals call Amgen Field because the company’s foundation donated money to open it.
Until recently, Amgen has enjoyed a charmed life in the often treacherous biotech industry.
Founded in 1980 as AMGen (Applied Molecular Genetics), the company pioneered products based on advances in molecular biology that have enabled scientists to use living organisms manufactured inside living cells to create novel medicines.
It was almost two decades ago that Amgen introduced Epogen, one of the biotech industry’s first blockbuster drugs, and more recently its longer-acting cousin, Aranesp. These anemia drugs treat nearly a million U.S. patients with chronic kidney disease or cancer each year.
The drugs, which are the single biggest medication expense in the federal Medicare program, accounted for half of Amgen’s $14.3 billion in revenue and 60% of its $2.95 billion in profit last year.
Despite the recent drop in sales of its anemia product line, Amgen reported last month that its revenue increased 3% during the second quarter to $3.7 billion, versus $3.6 billion a year earlier. Profit rose 2% to $1.3 billion from $1.2 billion.
As recently as last year, Amgen, the world’s largest biotech company by sales, enjoyed a market capitalization higher than many top-shelf pharmaceutical companies. It has more than 20,000 employees worldwide, with nearly half of them outside California in far-flung offices including Australia and Latvia.
The company has more than doubled the size of its local staff since the start of the decade, hiring an average of two employees a day. Parking is so scarce on campus that valets help double and triple park cars on employee lots.
Amgen’s recent trouble began when research studies by the company and others raised questions about Epogen and Aranesp in some dosages and patients.
Fallout from the studies rankled the company, patients and regulators, who appear to be taking an increasingly critical look at these drugs.
In April came the first blow. The Food and Drug Administration issued its severest warning, a “black box” label, on the drugs, and doctors began cutting down on their prescriptions. Medicare was quick to follow with its restrictions.
Amgen executives appear confident they can reverse, or at least blunt, some of the company’s recent misfortunes.
Last week, the company released a statement saying the recent Medicare decision has “no scientific basis and . . . is incompatible with good clinical practice.” It’s appealing the decision.
Leonard Lieb, 60, a corporate recruiter who lives in Thousand Oaks, said he had heard the recent buzz around town about layoffs. He said he hoped it would not be as bad as some had predicted. As he sat outside a popular new local mall known as the Lakes, he said, “All we can do is wait and see if all this blows over.”
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