Amgen admits job cuts on way after anaemia drugs drama

By Emilie Reymond

- Last updated on GMT

Related tags Erythropoietin

Amgen has finally put an end to weeks of rumours and speculations
by admitting its plans to slash 12-14 per cent of its workforce to
offset the recent difficulties it has been facing with the sales of
its anaemia blockbusters.

Amgen's spokesperson in the UK, N​igel Thornton, told on Tuesday that the biotech giant had no plans to make any redundancies; however, yesterday's announcement confirms the recent events around its anaemia franchise have been too heavy to bear and the biotech will cut up to 2,600 jobs. The company is expecting the move to help save more than $1bn (€740m) over the next year. "The initiatives announced respond to that new reality by taking account of reduced revenues and appropriately lowering costs across the company,"​ said Kevin Sharer, Amgen's CEO, in a statement yesterday. The world's largest biotech company had given a hint of its plans last Friday in a filing with the US Securities and Exchange Commission (SEC) in which it said that depending on the outcome of certain events - including Medicare's decision on the coverage of its anaemia drugs - it "may be required to take further actions to reduce costs". ​ The firm which generates half of its revenue with its anaemia franchise has been struggling in recent months as scrutiny has intensified around its two top-selling drugs Aranesp (darbopoietin alfa) and Epogen (epoetin alfa). The company's anaemia products' sales declined 6 per cent in the second quarter of 2007. The culprit for these disappointing figures was Aranesp which, despite generating $578m in US sales, took a 19 per cent plunge from the same quarter in 2006. The drug suffered the effects of a change in its labelling which was recently implemented by the US Food and Drug Administration (FDA) following concerns over the safety of erythropoietin stimulating agents (ESAs) - the class of drugs to which Aranesp belongs - in anaemia patients with cancer. To make things worse, a fortnight ago, the Centers for Medicare and Medicaid Services' (CMS) released the final version of its coverage plan of ESAs used by cancer patients. Although, it was less strict than the initial version proposed in May, CMS said it would limit payments for ESAs in the cancer setting - which could have further impact on Aranesp's sales. So far, the company's other anaemia product Epogen - also an ESA - has been spared by the hit as it is indicated for anaemia patients with kidney disease and not cancer. Revenues for the drug rose 2 per cent year-over-year to $624m. But this drug could now be threatened too by a forthcoming FDA committee meeting scheduled next month which will assess the safety of using ESAs in kidney disease patients with anaemia. Furthermore, CMS is expected to release its final decision in the next few days regarding the reimbursement of ESAs in kidney disease patients - Aranesp is also indicated in the kidney failure setting. "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 in response to any resulting declines in revenues,"​ the company said last week in the SEC filing. The California-based biotech has already undergone a "re-scoping" of its Ireland manufacturing operations, the construction of which was previously reported to have been delayed, revisions of its planned manufacturing expansion in Puerto Rico, and has also moderated the expansion of its research facilities. As a result of these decisions, the company recorded charges for asset impairment and related costs of $289m during the three months ended 30 June 2007. Yesterday's announcement will add around $400m in restructuring charges to the bill.

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