Based: Thousand Oaks, CA
Announced layoffs: 4,000
There is nothing like agitated analysts stirring up discontent among investors to get a CEO to start counting pennies, tracking the P/E ratio of his company's shares and checking head count. Throw in an activist investor who speaks publicly into that cauldron and it is bound to lead to job cuts.
That is more or less what happened with Amgen ($AMGN). Investors were already unhappy about the company's high rate of R&D investing relative to revenue when ISI's Geoffrey Porges released some tough assessments of Amgen. He pointed out that it had spent $30 billion in R&D in 10 years and only realized $15 billion in added product sales. He suggested a breakup might be the best bet for investors.
Shortly after, CEO Bob Bradway announced that his big biotech would whack up to 15% of the company's workforce, or about 2,900 people. It targeted research and manufacturing sites in Seattle and Bothell, WA, and Boulder and Longmont, CO, including the massive 750,000-square-foot Helix research campus in Seattle and its 610 staffers. The cuts would also fall heavily on manufacturing, with Bradway saying that new, more efficient manufacturing techniques would allow the drugmaker to eliminate about 25% of its manufacturing assets.
But that wasn't enough for Dan Loeb, manager of the Third Point hedge fund, who threw his support behind the idea of Amgen breaking itself into what he believed would be more valuable pieces. He laid out his thoughts in a letter to investors: a breakup that would have one company handle Amgen's legacy drugs, like the blockbusters Neulasta and Enbrel, and then spin off another piece that would take with it the unapproved pipeline, works in progress like its cardio drug evolocumab and leukemia treatment blinatumomab.
A week after getting that piece of mail, Bradway said Amgen had concluded that its original target of cutting 12% to 15% was a tad shortsighted and that a 20% shaving was more of what was needed. He said that would allow the company to save $1.5 billion by 2018. But that meant another 1,100 jobs.
Those were the plans when the year ended, but cost-cutting has a way of picking up momentum and Amgen has kept at it this year. In March, the drugmaker said it would cut another 300 jobs. This time it targeted Onyx Pharmaceuticals, which it acquired in a $10.4 billion deal in 2013 to get its hands on the cancer drug Kyprolis. The 300 positions amount to 40% of the Onyx staff. The news came a week after Amgen revealed that Kyprolis had bested Takeda's blockbuster Velcade in extending progression-free survival for patients with relapsed multiple myeloma, news that made some analysts up their sales forecasts for the drug. By that point, investors were already enjoying a substantial upside to the cuts, with Amgen's share price rising more than 30% from when it began whacking jobs last summer.
-- Eric Palmer (email | Twitter)
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