Amgen Outlines Strategy, Growth Objectives and Capital Allocation Plans
Robert A. Bradway, chairman and chief executive officer at Amgen, lays out the company’s strategy for innovator biopharmaceuticals, branded biosimilars, biomanufacturing, and capital allocation.
Robert A. Bradway, chairman and chief executive officer at Amgen, has laid out the company’s strategic priorities as part of a business review for innovator biopharmaceuticals, branded biosimilars, biomanufacturing, and capital allocation. Following the announcement of a restructuring plan made in July 2014 that included an approximate 23% decrease in the company’s facilities footprint and an approximate 12% to 15% reduction in staff, the company has announced further job cuts. So what is ahead for Amgen?
|Robert A. Bradway
Chairman & CEO
More restructuring for Amgen
In July 2014, the company announced a restructuring plan that will result in a 23% decrease in its facilities footprint and a reduction of approximately 2,900 positions, or a 12-15% reduction in staff by the end of 2015. This week the company announced the next steps of its restructuring efforts, which include plans to further reduce headcount by an additional 600 to 1,100 positions in 2015, which when combined with the previously announced reductions, would amount to a combined reduction of 3,500 to 4,000 positions, or 20% of its workforce. This expansion of the company’s restructuring plan also will implement additional efficiency initiatives, particularly in the area of shared services, outsourcing, and other external expense categories, according to a recent filing with the US Securities and Exchange Commission. The additional actions will result in pre-tax accounting charges in the range of $100 million to $150 million, which are expected to be incurred primarily in 2015. The total restructuring pre-tax GAAP charges of between approximately $935 million and $1.035 billion will be incurred in 2014 and 2015, with $376 million already incurred in the third quarter of 2014. The focused operating model and combined restructuring actions will result in a total annual savings of up to $1.5 billion by 2018.
Re-engineering its facilities footprint
As announced in July 2014, that restructuring involves the closing of the company’s facilities in Colorado and Washington. Amgen operates sites in Bothell and Seattle in Washington, which include research and development facilities, and facilities in Boulder and Longmont, Colorado, which include manufacturing operations As of December 31, 2013, Amgen owned or leased more than 200 properties, according to the company’s 2013 annual filing. Table I highlights the company’s primary facilities.
|Table I: Amgen’s Primary Facilities|
|Location||Manufacturing||Administrative||R&D||Sales & Marketing||Warehouse||Distribution Center|
|Thousand Oaks, CA||X||X||X||X||X||X|
|South San Francisco, CA||X||X||X|
|West Greenwich, RI||X||X||X|
|Other US Cities||X||X||X|
| As of December 31, 2013.
Source: Amgen (10-K Annual Filling, US Securities and Exchange Commission, 2013).
As it seeks to close certain facilities, the company is also investing in new biomanufacturing capacity. In 2013, Amgen announced that it was investing approximately $200 million to build a new manufacturing facility in Singapore, which will initially focus on expanding Amgen’s manufacturing capability for monoclonal antibodies. The facility will be capable of manufacturing both clinical and commercial products. This week, Bradway affirmed Amgen is on track to produce commercial products from its new Singapore biomanufacturing facility beginning in 2017. Part of the strategy of the new facility is to equip it with improved bulk production capabilities versus conventional methods. The company estimates that the new facility will involve one-quarter of the capital costs, one-third of the operating expense, and twice the speed of conventional facilities. Amgen estimates these new capabilities will result in an estimated cost reduction of 60% or more per gram of protein.
Near-term growth prospects
Anthony C. Hooper, executive vice president of global commercial operations at Amgen, provided the company’s near-term focus for its commercial portfolio as part of the company’s business review. He described the potential doubling of the product portfolio over the next three years and outlined several growth opportunities, including leveraging strong specialty market experience, driving continued momentum in the current portfolio of growth-phase products, successfully launching several new innovative products and biosimilars, and continuing to move into new geographic growth markets. The company anticipates approximately $2 billion in sales in new and emerging markets in Asia, Turkey and the Middle East, Latin America, and Russia and Eastern Europe by 2018.
Hooper provided an update on Amgen’s commercial strategy in its five specialty areas, which included providing updates for Enbrel (etanercept), its drug to treat psoriasis and rheumatoid arthritis, and Neulasta (pegfilgrastim), a drug to reduce infections in patients receiving chemotherapy. Enbrel and Neulasta were the company’s two top-selling drugs in 2013 (see Table II ). On a combined basis, Neulasta/Neupogen and Enbrel accounted for 57% of Amgen’s total product sales in 2013 of $18.192 billion, with Neulasta/Neupogen accounting for 32%. A key issue for Amgen now and going forward is to diversify its portfolio and generate revenue from new products, something particularly important as Neulasta faces both US and European patent expiration in 2015 with the US patent expiring in October 2015 and the EU patent in February 2015 although supplemental protection for the pegylated granulocyte-colony stimulating factor in certain EU countries, France, Germany, Italy, Spain, and the United Kingdom, expires in 2017, according to the company’s 2013 annual filing.
|Table II: Amgen’s Top-Selling Products, 2013|
|Product: Proprietary Name (Active Ingredient)||2013 Sales||Percentage Change
|Neulasta (pegfilgrastim)/Neupogen (filgrastim)||$5.790 Bn||+8%|
|Enbrel (etanercept)||$4.551 Bn||+7%|
|Aranesp (darbepoetin alfa)||$1.911 Bn||-6%|
|Epogen (epoetin alfa)||$1.953 Bn||+1%|
|Xgeva (denosumab)||$1.019 Bn||+36%|
|Prolia (denosumab)||$744 M||+58%|
|Sensipar/Mimpara (cinacalcet)||$1.089 Bn||+15%|
|Other Products||$1.135 Bn||+26%|
| Bn is billions; M is millions.
Xgeva (denosumab) was first approved by the US Food and Drug Administration (FDA) in November 2010 to prevent fractures when cancer has spread to the bones. Prolia (denosumab) was approved by the FDA in June 2010 to treat osteoporosis.
Source: Amgen (10-K Annual Filling, US Securities and Exchange Commission, 2013).
In inflammation, the company said that sales of Enbrel are expected to reach $5 billion and that the company expects to realize a step-up in profitability for Enbrel starting in November 2016 with the expiry of a co-promotion/royal arrangement with Pfizer. Amgen is also developing a biosimilar of adalimumab, the active ingredient in Humira, AbbVie’s autoimmune disease treatment blockbuster. Adalimumab, an anti-TNF-Î± monoclonal antibody, is approved for the treatment of inflammatory diseases, including rheumatoid arthritis, plaque psoriasis, polyarticular juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, and ulcerative colitis. Earlier this month, Amgen reported that is biosimilar version met its primary endpoint in patients with moderate-to-severe plaque psoriasis.
In oncology, Amgen announced that the on-body delivery system for Neulasta (pegfilgrastim) is under review by the US Food and Drug Administration (FDA). In nephrology, the company said that Sensipar (cinacalcet), its drug to treat secondary hyperparathyroidism in patients with chronic kidney disease on dialysis, has the potential to reach approximately $1.5 billion in sales before patent expiry in 2018. In 2013, the drug posted sales of nearly $1.1 billion (see Table II ). In bone health, the company said that the US share of Prolia (denosumab) has quadrupled over the past two years and is annualizing at $1 billion in sales in 2014. Also, its investigational drug, romosozumab, potentially provides a monthly bone-building alternative for patients with osteoporosis. In cardiovascular, Hopper discussed the commercial opportunity and launch strategy for ivabradine and evolocumab, two late-stage candidates for Amgen. Evolocumab is under regulatory review in the US and Europe for dyslipidemia. Results from a Phase III vascular imaging study in 950 patients are expected in 2016. The company’s long-term Phase III outcomes trial has been expanded by 5,000 patients to 27,500, and results are expected no later than 2017 (event-driven). Ivabradine, a drug to treat chronic heart failure, is also under priority review by the FDA.
Late-stage pipeline highlights
Overall, Amgen’s late-stage pipeline is advancing with four programs currently under regulatory review. These include: evolocumab for US and EU review; ivabradine for US review; talimogene laherparepvec for treating metastatic melanoma under US and EU review; and blinatumomab for treating relapsed/refractory B-precursor acute lymphocytic leukemia (ALL) under US and EU review. In addition, data from a Phase II combination study of talimogene laherparepvec with ipilimumab are expected in 2016, followed by results from a Phase II combination study with pembrolizumab in 2017. Blinatumomab is under priority review by the FDA and also is being reviewed in Europe. Results from a Phase II study in adult patients with minimal residual disease positive ALL are expected in 2014, and results from a Phase III study in adult patients with relapsed, refractory ALL in 2016.
In addition, Phase III data are expected from three programs by the end of this year. Overall survival results for trebananib in a Phase III trial in women with recurrent ovarian cancer are expected by year-end. Progression-free survival data are expected from a first-line ovarian cancer study in 2015. For brodalumab, a drug to treat inflammatory disease, data from two placebo-controlled studies of brodalumab versus ustekinumab are expected by year-end. Phase III psoriatic arthritis data are expected in 2016. The company’s investigational treatment for migraines, AMG 334, is advancing. Results from a Phase IIb episodic migraine study are expected by year-end, followed by results from a Phase II chronic migraine study in 2016.
In additional pipeline developments, data from a Phase III trial evaluating rilotumomab for the treatment of gastric cancer are expected in 2015. Data from a Phase III trial for its osteoporosis drug, romosozumab, are expected in 2016. Results from a Phase III placebo-controlled study of romosozumab in 6,000 women with postmenopausal osteoporosis are expected in the first half of 2016. Results from a second event-driven Phase III study evaluating romosozumab versus alendronate in 4,000 women are expected in 2017. Results from a Phase III trial evaluating AMG 416 versus Sensipar for the treatment of secondary hyperparathyroidism are expected in 2015. Also, the company expects results from a Phase IIb oral formulation study of omecamtiv mecarbil in chronic heart failure patients in 2015.
A refocus in R&D
Sean E. Harper, MD, executive vice president of research and development at Amgen, outlined the company’s strategic approach to R&D. Some key points of emphasis include: a focus on nnovative medicines for unmet needs in patients with serious illnesses; on emphasis on target validation in humans; modality independence with a focus on biologics; operational efficiency; and cultivating external innovation.
In addition, Amgen has refocused and differentiated its discovery research efforts in several key therapeutic areas: inflammation and oncology, metabolism and bone, cardiovascular, and neuroscience. The company has consolidated small, medium and large molecule technologies into one integrated platform, has focused efforts on immuno-oncology, and seeks to leverage its position in human population genetics to identify or validate targets in humans wherever possible.
Scott Foraker, vice president and general manager, biosimilars, Amgen, discussed how biosimilars are a good strategic fit for the company and represent a growth opportunity with the potential to deliver more than $3 billion in annual revenues. In addition to the biosimilar adilimumab, trastuzumab, bevacizumab, infliximab, rituximab and cetuximab programs, Amgen has initiated three additional biosimilar programs. Foraker noted that Amgen’s biosimilar infliximab and rituximab have advanced to the “clinical-ready” phase. Amgen’s first biosimilar is expected to launch in 2017, followed by four others through 2019.