|Amgen CEO Robert Bradway|
When California biotech Amgen ($AMGN) picked up Onyx Pharmaceuticals a year ago for $10.4 billion to get its hands on the multiple myeloma drug Kyprolis, investors were wondering what the future would hold for the world's largest biotech. CEO Robert Bradway at least partially answered that question Tuesday saying the company would ax 15% of its workforce.
The news followed a surprisingly good earnings report in which net income leapt nearly 25%, beating analysts forecasts by a long shot. But that was one quarter and the drugmaker is facing a future in which is key product, arthritis drug Enbrel, will face biosimilar competition. In a filing with the SEC, the drugmaker said it would cut between 2,400 and 2,900 people from its workforce of about 20,000, amounting to 12% to 15%. It expects to save about $700 million in 2016 copared to 2013, Bradway told analysts in a call Tuesday.
The ax will fall heavily on manufacturing and R&D facilities in Seattle and Bothell, Washington, and Boulder and Longmont, Colorado, which will be closed by the end of next year. But the company insisted the trims would be universal. Bradway said in the call that while the R&D and manufacturing cuts are being concentrated heavily in Washington and Colorado, "the changes we announced today are company-wide changes," FierceBiotech reports. At its headquarters in Thousand Oaks, CA, it will trim enough people that it will be able to consolidate its operations into few buildings.
The company said it will take pretax charges of between about $775 million and $950 million when it is all done to pay for the layoffs.
The bloodletting announcement followed a strong Q2 earnings report. It said net income was up 23% percent to $1.55 billion, or $2.01 a share, from $1.26 billion, or $1.65 a share, in the same quarter a year ago. When one-time charges were stripped away, that amounted to $2.37 a share, beating analysts forecasts by an average of 30 cents a share, Bloomberg reports. Revenue was up 11% to $5.18 billion.
Products sales were up 8%, propelled by its arthritis drug Enbrel, which turned in $1.24 billion in sales, driven mostly by price, the company said. But therein lies part of Amgen's problems. Beyond Enbrel, a legacy drug that will soon face biosimilar competition, some analysts see a portfolio that is not all that impressive. That is where Onyx and its Kyprolis come in. The drug is forecast to reach $2 billion to $2.4 billion in sales by 2019, and peak at $3 billion. But even it faces competition from Celgene's ($CELG) new drug Pomalyst, which launched in February and is being promoted heavily by a company with experience in myeloma.