Amgen has announced a restructuring plan to invest in continuing innovation and the launch of its new pipeline molecules, while improving cost structure.
Initial efforts include streamlining the organization, reducing layers of management, increasing managerial spans of responsibility and beginning implementation of a revised geographic site plan.
As a first step, Amgen will reduce its staff by 2,400 to 2,900, beginning later this year and continuing through 2015, predominantly in the U.S. This represents approximately 12% to 15% of Amgen's global workforce. It also will close facilities in Washington state and Colorado.
"The talented staff members at these locations have made enormous contributions to advancing biotechnology over the years and the surrounding communities have been very supportive, so it is with great reluctance that we acknowledge the need to exit," said Robert A. Bradway, Amgen’s chairman and CEO. "At each site, we are actively engaging in discussions with third parties about potential future use of the facilities."
Amgen will expand its presence in the biotechnology hubs of South San Francisco, Calif., and Cambridge, Mass., and retain its headquarters in Thousand Oaks, Calif., with a reduced number of staff consolidated into fewer of the existing buildings.
Company-wide, these actions will result in an approximate 23% reduction in Amgen's facilities footprint. The combination of these efforts will reduce operating expenses by approximately $700 million in 2016 compared to 2013, although most of the savings will be reinvested to support global launches of new products.
As a next step, Amgen said it is evaluating additional efficiency initiatives, particularly in the area of shared services and other external expense categories to support its growth objectives. It plans to review these initiatives, together with an estimate of resulting cost savings, pipeline progress and commercial plans, and performance against its strategic priorities during a business review meeting in the fourth quarter.
Amgen made the announcement within its quarterly earnings release. Key results of that include total revenues up 11% to $5,180 million, with 8% product sales growth driven by strong performance across the portfolio, particularly Enbrel, Kyprolis, Prolia and XGEVA. Earnings per share grew 25% to $2.37, driven by higher revenues and a significant increase in the profitability of Enbrel. Adjusted net income increased 26% to $1,823 million.
"Robust growth through the first half of 2014 affirms the underlying strength of our business," said Bradway. "We are making excellent progress in advancing our pipeline as we prepare to launch a number of promising new innovative medicines."