Amgen Studies Cost-Cut Options
Drug-Sales Slump Sparks
A Slowdown in Spending;
Layoff Rumors Circulate
By MARILYN CHASE
August 10, 2007; [WSJ] Page B4
Biotechnology company Amgen Inc. is weighing cost-cutting options to offset declining sales of its top-selling anemia drug.
Economies under way will include slowing the growth of research-and-development spending for this year -- projected to expand at a slower rate than last year's outlay of $3.2 billion, or 23% of sales.
Also being tightened are capital projects, including expansion of manufacturing facilities, which will now be "moderated," the company said in a 10-Q quarterly report filed with the Securities and Exchange Commission.
Amgen has declined comment on rumored layoffs from its 20,000-person payroll. The rumors circulating around the Thousand Oaks, Calif., headquarters were reported in yesterday's Los Angeles Times.
"We haven't made any announcements about impact to staff," said spokesman David Polk, declining to speculate about future actions. Amgen closed facilities during the July 4 week in a long-planned move unrelated to its sales slump, he said.
A voice mail to staff by Amgen Chief Executive Kevin Sharer -- interpreted in some quarters as prefiguring possible layoffs -- was dismissed by the spokesman as a routine update for employees on recent federal actions tightening reimbursement policy for anemia drugs.
Second-quarter sales of Aranesp, Amgen's biggest product, slumped 19% to $578 million from $713 million a year earlier. Aranesp is prescribed to boost flagging red-blood-cell counts in patients suffering anemia due to kidney disease and cancer chemotherapy. Studies of risks of heart disease and cancer progression seen with overuse of such drugs have led to tighter dosing and lower reimbursement.
When the company announced those results July 26, Mr. Sharer told analysts: "We're taking actions to restore Amgen....We adjusted our cost base to be more in line with revenue growth, seeking efficiencies and making tough-minded choices."
In the 10-Q, released late Wednesday, Amgen added, "As a result of these challenges, we have commenced a global review of the company's business plans to identify opportunities to improve our cost structure."
Trimming growth of operating expenses is under way. The company is also refocusing spending on critical research and development and making changes to ongoing capital projects. Amgen said these include delay in Ireland manufacturing expansion, revisions to planned manufacturing expansion in Puerto Rico and moderated research-facility expansion. Amgen posted related charges of $289 million in the second quarter.
"We may be required to take further actions to reduce costs," Amgen added in the 10-Q, because of ongoing impact of strict new rules on anemia drug use by the federal Centers for Medicare and Medicaid Services, and uncertain outcome of fall meetings of advisory panels to the Food and Drug Administration covering renal drugs and drug safety.
online.wsj.com |
