Amgen to slash up to 14 percent of jobs

Amgen to slash up to 14 percent of jobs

By Lisa BaertleinWed Aug 15, 8:22 PM ET

Amgen Inc (AMGN.O), the world's biggest biotechnology company by sales, said on Wednesday it would cut 2,200 to 2,600 jobs, or 12 percent to 14 percent of its workforce, as it grapples with declining sales of its best-selling anemia drug Aranesp.

The company also cut its 2007 adjusted earnings guidance to a range of $4.13 to $4.23 per share from $4.28 per share.

As Amgen has milked its anemia franchise, analysts said rivals like Genentech Inc (DNA.N), which now has a bigger market capitalization than Amgen, have turned out innovative products that will drive growth.

Plans to cut research spending unnerved some analysts, who say the once-pioneering company is losing its edge.

"It looks like when your business needs to be diversified, you're cutting R&D," influential analyst Steven Harr, of Morgan Stanley, told executives on a conference call.

Amgen's shares have shed about 26 percent of their value so far this year, compared with a decline of 0.1 percent in the American Stock Exchange Biotech Index (.BTK).

Investors appeared to take little comfort from the cost-cutting plan. Amgen shares were roughly flat in extended trade after closing down 73 cents at $50.59 on Nasdaq.

Amgen's anemia offerings include Aranesp and Epogen, which generated combined sales of $6.6 billion in 2006 but are now under pressure due to concerns about safety and closer scrutiny by government insurance programs.

TOUGH YEAR

"This has not been an easy year or the one we expected," Chief Executive Kevin Sharer said in a conference call.

Thousand Oaks, California-based Amgen got about half of its 2006 revenue from its red-blood-cell-boosting anemia drugs.

Amgen will close some production operations and research and development to reduce capital expenditures by about $1.9 billion during 2007 and 2008. The company said it would book charges of $600 million to $700 million during that period.

Although manufacturing and research and development, the two biggest cost areas, will be targeted for reductions, the sales force likely will not be cut.

Sales of Aranesp, the top-selling biotech drug in the United States last year, fell 19 percent to $578 million in the second quarter as regulators put strict safety warnings on anemia drugs made by Amgen and Johnson & Johnson (JNJ.N) and the Centers for Medicare & Medicaid Services (CMS) began restricting payment for use by cancer patients.

Amgen executives said they don't expect to see the full impact on Aranesp sales until 2008.

Some analysts expect sales of Amgen's older anemia drug, Epogen, used to treat people with chronic kidney disease, are also likely to fall as regulators and CMS probe the use of anemia treatments in dialysis.

On other fronts, a jury next month will begin weighing Amgen's case for keeping a competing drug from Roche Holding AG (ROG.VX) out of the U.S. market.

To top it off, European regulators are expected to put new safety labels on anemia drugs.

Leerink Swann analyst Bill Tanner said the cuts beyond staffing hint at deeper concerns in the executive offices.

"It does certainly suggest that they think that their revenue opportunities -- especially for those (anemia) drugs -- has probably been permanently impaired," Tanner said.

Analysts worry that the once-nimble company is looking like a lumbering industry giant.

"As far as I'm concerned, Amgen is a Big Pharma," said Les Funtleyder, a healthcare analyst at Miller Tabak in New York.

"They have a big infrastructure. They have a reliance on a couple of core products. Their pipeline is so-so. They're a huge company in terms of market cap. And they even may be subject to some generic competition," Funtleyder said.

(Additional reporting by Lewis Krauskopf in New York, Kim Dixon in Chicago and Sue Zeidler and Nichola Groom in Los Angeles)

http://news.yahoo.com/s/nm/20070816/bs_nm/amgen_dc_3