What is Next for Amgen?By
Amgen announced last week a restructuring plan that would reduce its global workforce by 12% to 15% and close facilities in Washington and Colorado. As Amgen moves forward with this plan, how do its current commercial portfolio and pipeline fare and how will its manufacturing network be affected? DCAT Value Chain Insights takes an inside look.
Amgen hopes that the restructuring 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, the company is evaluating additional efficiency initiatives, particularly in the area of shared services and other external expense categories to support its growth objectives. Amgen said it plans to review these initiatives, together with an estimate of resulting cost savings, pipeline progress, commercial plans, and performance against its strategic priorities during a business review meeting later in the fourth quarter of this year. So what might be in store for the company?
|Robert A. Bradway
Chairman & CEO
Examining the details
Amgen announced last week a restructuring plan that will initially 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, the company will reduce staff by 2,400 to 2,900, beginning later this year and continuing through 2015, predominantly in the US. This represents approximately 12% to 15% of Amgen’s global workforce. The company will also close its facilities in the states of Washington and Colorado. 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 (see Table I). At each site, the company is in discussions with third-parties about potential future use of the facilities.
At the same time, Amgen said it will expand its presence in the biotechnology hubs of South San Francisco, California and Cambridge, Massachusetts and retain its headquarters in Thousand Oaks, California 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 the company’s facilities footprint. As of December 31, 2013, Amgen owned or leased more than 200 properties (1). Table I highlights the company’s primary facilities. 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.
|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).
Amgen said that its restructuring actions will result in pre-tax accounting charges in the range of $775 million to $950 million, primarily incurred in 2014-2015. 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. The savings from these actions are reflected in the company’s 2014 guidance; 2015 savings are expected to be modest due to the timing of these actions during the calendar year. Amgen estimates that its full-year 2014 revenues will be in the range of $19.5 billion to $19.7 billion.
As a next step, the company is evaluating additional efficiency initiatives, particularly in the area of shared services and other external expense categories to support its growth objectives. Amgen said it plans to review these initiatives, together with an estimate of resulting cost savings, pipeline progress, commercial plans, and performance against its strategic priorities during a business review meeting in the fourth quarter.
“Robust growth through the first half of 2014 affirms the underlying strength of our business,” said Robert A. Bradway, chairman & chief executive officer of Amgen in a July 29, 2014, company statement. “We are making excellent progress in advancing our pipeline as we prepare to launch a number of promising new innovative medicines. From a position of strength, we have announced today restructuring initiatives that will allow us to reallocate resources to invest in our upcoming launches and drive growth.”
Amgen announced its restructuring plan with its second-quarter and first-half results. For the six months ending June 30, 2014, Amgen reported total revenues of $9.701 billion, up from $8.917 billion in the year-ago period. Net income decreased slightly from $2.692 billion in the first half of 2013 to $2.620 billion in the first half of 2014. On a quarterly basis, the company’s total revenues increased 11% to $5.180 billion in the second quarter with an 8% increase in product sales to $4.949 billion.
As for the full year of 2013, the company’s top-selling products in the second quarter were Neulasta (pegfilgrastim)/Neupogen (filgrastim) and Enbrel (etanercept). Combined Neulasta and Neupogen sales declined year-over year by 1% in the second quarter of 2014 compared to the year-ago period to $1.429 billion. Neulasta sales declined 1% to $1.133 billion, and Neupogen sales declined 9% in the second quarter to $296 million. Neulasta/Neupogen were Amgen’s top selling products on a combined basis in 2013 with sales of $5.790 billion, up 8% compared to 2012 (see Table II). Neulasta was launched in 2002 and is indicated to decrease the incidence of infection associated with chemotherapy-induced febrile neutropenia in cancer patients with non-myeloid malignancies. Neupogen was launched in 1991 and is approved for five different indications. It is used primarily for reducing the incidence of infection as manifested by febrile neutropenia for patients with non-myeloid malignancies undergoing myelosuppressive chemotherapy associated with a significant incidence of severe neutropenia with fever. Enbrel was the company’s second-best selling product in the second quarter of 2014 with sales of $1.243 billion, up 7% year over year, and in the full year of 2013 with sales of $4.551 billion (see Table II ).
|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).
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 (1).
Two Amgen products, Xgeva and Prolia, both contain the same active ingredient of denosumab but are approved for different indications, patient populations, doses, and frequencies of administration. Xgeva posted 2013 full-year sales of $1.019 billion (up 36% year over year), and Prolia posted 2013 sales of $744 million (up 58% year over year (see Table II). Xgeva was launched in the United States in 2010 and is indicated for the prevention of skeletal-related events (SREs) (pathological fracture, radiation to bone, spinal cord compression or surgery to bone) in patients with bone metastases from solid tumors. It is not indicated for the prevention of SREs in patients with multiple myeloma. Xgeva was launched in Europe in 2011 and is indicated for the prevention of SREs in adults with bone metastases from solid tumors. Prolia was launched in the United States and Europe in 2010. In the United States, it has four different approved indications and is used primarily in the indication for the treatment of postmenopausal women with osteoporosis at high risk for fracture, defined as a history of osteoporotic fracture, or multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. Xgeva faces increased generic competition from zoledronic acid. In Europe, Prolia is used primarily for the treatment of osteoporosis in postmenopausal women at increased risk of fractures (1).
Aranesp (darbepoetin alfa), Epogen (epoetin alfa), and Sensipar/Mimpara (cinacalcet) are Amgen’s other top-selling drugs, each with sales over $1 billion in 2013. Aranesp posted 2013 sales of $1.911 billion, down 6% year over year. Epogen posted a 1% gain to $1.953 billion, and Sensipar/Mimpara posted a 15% gain to $1.089 billion (see Table II). For Aranesp, European patents for glycosylation analogs of erythropoietin proteins expire in August 2014 although supplemental protection in certain EU countries, France, Germany, Italy, Spain, and the United Kingdom, expires in 2016; US patents for glycosylation analogs of erythropoietin proteins expire in 2024 (1). For Epogen, the US patent pertaining to pharmaceutical erythropoietin formulations with certain stabilizers expires August 26, 2014, and US patents relating to the cells that make certain levels of erythropoietin expire in May 2015 (1). For Sensipar/Mimpara, US patents for calcium receptor-active molecules including species, expire in October 2015, US patents for methods of treatments expire in December 2016, and US patents for calcium receptor-active molecules expire in March 2018; in Europe, patents for calcium receptor-active molecules expire in October 2015 although supplemental protection in certain EU countries, France, Germany, Italy, Spain, and the United Kingdom, expires in 2019 (1).
Key to Amgen’s growth going forward is its late-stage pipeline. In October 2013, Amgen acquired Onxy Pharmaceuticals for $10.4 billion. With the acquisition of Onyx, Amgen gained access to Onyx’s multiple myeloma franchise, with Kyprolis (carfilzomib) already approved in the US. In addition, Amgen gained three Onyx partnered oncology assets: Nexavar (sorafenib) tablets (an Onyx and Bayer HealthCare Pharmaceuticals, Inc. compound), Stivarga (regorafenib) tablets (a Bayer compound), and palbociclib (a Pfizer, Inc.compound) as well as multiple oncology compounds in various stages of clinical development. Earlier this month, Amgen reported that that a planned interim analysis for Kyprolis demonstrated that the Phase III clinical trial ASPIRE for treating relapsed multiple myeloma met its primary endpoint of progression-free survival. Results from the ASPIRE study will form the basis for regulatory submissions throughout the world beginning in the first half of 2015. In the US, the data may support the conversion of accelerated approval to full approval and expand the current indication.
In other key pipeline developments, the company expects to submit a biologics license application (BLA) for evolocumab in the US and a marketing authorization application in the EU during the third quarter of 2014 for dyslipidemia. It has submitted a new drug application (NDA) in the US for ivabradine to treat chronic heart failure. It has also submitted a BLA in the US for talimogene laherparepvec and expects to submit a marketing authorization application in the EU during the third quarter 2014 for regionally and distantly metastatic melanoma. For blinatumonomab, the company said it discussed the recent Food and Drug Administration (FDA) Breakthrough Therapy Designation and stated that it expects to submit a BLA in the US during the second half of 2014 for adults with Philadelphia-negative relapsed/refractory B-precursor acute lymphoblastic leukemia. For vextibix, the company discussed the recent FDA approval for use in combination with Folfox as a first-line treatment, and conversion of accelerated approval to full approval in the monotherapy setting in patients with wild-type KRAS metastatic colorectal cancer. The company is also progressing Phase III studies for trebananib to treat ovarian cancer, brodalumab for treating moderate to severe psoriasis, and AMG 416 (formerly known as velcalcetide) for treating secondary hyperparathyroidism in patients with chronic kidney disease receiving hemodialysis.
1. Amgen, 10-K Annual Filing (US Securities and Exchange Commission, 2013).