Amgen Laying Off up to 2,600 Employees Over Slow Aranesp Sales
Amgen announced that it is laying off 2,200 to 2,600 employees — 12 to 14 percent of its work force — cutting approximately $1.9 billion in planned capital expenditures this year and next, and possibly closing or “rationalizing” some production facilities.
Amgen expects these and other “restructuring” steps to generate pretax savings of $1 billion to $1.3 billion next year. The company said it will attempt to soften the blow to laid-off workers by relying on attrition, hiring freezes and a voluntary transition program to achieve as many of the job cuts as possible, as well as giving career counseling to those who are pushed out.
The company said the restructuring is needed because of lower revenues from Aranesp (darbepoetin alfa), which is used to treat kidney disease-related and chemotherapy-induced anemia. This drug is part of a class of products called erythropoietin-stimulating agents, also including Amgen’s Epogen (epoetin alfa), which have faced safety concerns recently. Earlier this year, the FDA added new warnings to physician labeling for the products.
U.S. sales of Aranesp fell 18 percent to $578 million in the second quarter of 2007, compared with the same period last year, although international sales of the product increased 8.5 percent to $371 million.
Cumulative pretax restructuring charges for the restructuring are expected to be $600 million to $700 million in 2007 and 2008, which includes $289 million for asset impairment and related costs already reported in the second quarter. The company also reduced its earnings per share guidance for 2007 from $4.28 down to $4.13–$4.23, excluding the restructuring charges, due to the lower Aranesp revenues.
The company said the restructuring will allow it to keep R&D spending high; however, it will be reevaluating various projects to decide which deserve the highest priority.
“Recent changes in coverage rules and adjustments to Amgen’s FDA-approved labels for Epogen and Aranesp have and will adversely affect Amgen’s revenue,” Kevin Sharer, Amgen chairman and CEO, said. “The initiatives announced today respond to that new reality by taking account of reduced revenues and appropriately lowering costs across the company.” — Martin Gidron