Amgen to cut 2,900 workers and close four facilities
Biotech giant Amgen Inc. said it would cut up to 2,900 employees and close facilities in Washington state and Colorado as the Thousand Oaks company moved to rein in costs and focus on new drugs.
The company said the cuts, which would hit nearly 15% of its 20,000 worldwide employees, are part of a restructuring that will allow it to shift resources toward marketing new products it expects to release in coming years.
Amgen did not say how many jobs will be lost at the company’s Thousand Oaks headquarters. The company will retain its headquarters there, “albeit with a reduced staff” consolidated into fewer buildings, Amgen chief Robert A. Bradway said in a conference call with analysts.
The company is closing four facilities: two in Washington state and two in Colorado.
The planned cuts appear to address concerns by some analysts on Wall Street that Amgen was inefficient compared with smaller competitors, causing its profits to suffer.
“What Amgen clearly is trying to do is catch up, from an operational and structural cost basis, with its peer group,” said Ravi Mehrotra, a biotech research analyst with Credit Suisse in New York. “This is addressing the criticism that it is the least-efficient company from a structural perspective.”
Investors seemed pleased with the news, driving Amgen shares up about 4% in after-hours trading. The company’s stock was up 66 cents, or 0.5%, to $123.31 in trading ahead of the news.
Amgen said it will cut 2,400 to 2,900 jobs, predominantly in the United States, beginning this year and continuing through 2015. The company said it expects some of the cuts to be achieved through voluntary buyouts.
It will reach the targeted cuts by “reducing layers of management” and looking for areas of duplication, Bradway said. Imposing the cuts will cost the company $775 million to $950 million and will reduce annual operating expenses by about $700 million in 2016.
In a statement, the company thanked its employees for years of service and vowed to “treat departing staff with respect.”
Most employees declined to speak to The Times as they left work Tuesday, with some once-secure jobs now in question as workers headed for the nearby 101 Freeway.
“It’ll be interesting,” one woman said with a smile.
“I wish I could” talk, one man said. “I could lose my job.... I wouldn’t want to risk it.”
The reductions were announced the same day the company posted some strong second-quarter numbers: a 23% increase in profit and 11% higher revenue. Net income was $1.55 billion, up from $1.26 billion a year earlier.
For longtime employees, massive cuts at Amgen are nothing new. In 2007, the company announced plans to lay off 2,600 employees. Nearly 700 of those cuts were in Thousand Oaks.
Founded in 1980, Amgen became the world’s largest independent biotech company by developing drugs to treat anemia, arthritis, kidney disease and bone disease. It is one of the largest publicly traded companies in Southern California, with $18.7 billion of revenue in 2013 and a market capitalization of about $93 billion.
In recent years, the company has looked to expand into new sectors, including a wider variety of treatments for cancer.
Last year, as Amgen struggled with slower sales growth, the company bought Onyx Pharmaceuticals Inc. for more than $10 billion. The deal gave Amgen control over a rare blood cancer drug, Kyprolis, which is expected to become highly popular in the next few years.
“What we’re doing,” Bradway said, “is we’re selectively reallocating resources away from some of our legacy investment areas to some of these areas that we think offer higher growth and greater returns.”
In some ways, the significant cuts at Amgen reflect how large and diverse the company has become, competing with much larger, global pharmaceutical companies.
“This is the sort of thing that pharma companies can do without a hiccup,” said Geoffrey Porges, a senior analyst at AllianceBernstein who focuses on biotech. “Pfizer, with revenue of $52 billion compared to $20 billion for Amgen, has much greater flexibility to shift assets around.”
So the cuts do not reflect lowered expectations for the company’s future, said Nick Vyas, a researcher at the Center for Global Supply Chain Management at USC’s Marshall School of Business.
“If you want to become the visionary, the best-in-class company, sometimes you do things like this when you’re doing well and continuing to do well,” Vyas said. “Amgen, in my view, is making the decision to be nimble and reinvest that money.”
Times staff writer Chad Garland contributed to this report.
