Amgen to reduce expenditures by $1.9 billion and cut staff by 12-14 percent
THOUSAND OAKS, Calif. Amgen today announced initiatives that will reduce company staff by 12-14 percent and deliver other operational efficiencies while ensuring continued investment at industry-leading levels in research and development, the company reported.
These initiatives will be substantially completed by 2008 and yield pre-tax savings from prior plan of between $1.0 billion—$1.3 billion in 2008. Cumulative pre-tax restructuring charges associated with these changes are expected to be $600 million—$700 million in 2007 and 2008, which includes $289 million for asset impairment and related costs reported in the second quarter. The company also announced that adjusted earnings per share guidance for 2007 has been changed from $4.28 to a range of $4.13—$4.23, excluding restructuring charges, due to lower Aranesp revenues.
Amgen pointed to the lower revenues from Aranesp and Epogen— due to Food and Drug Administration changes in approved labeling—as a reason for the changes. "At Amgen we have always been committed to investing in the future while squarely facing the challenges of today," said Kevin Sharer, Amgen’s chairman and chief executive officer. "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. The initiatives announced today respond to that new reality by taking account of reduced revenues and appropriately lowering costs across the company. We will continue to strongly support our research efforts directed at development of new medicines for grievously ill patients. These changes will also position Amgen for success in 2008 and beyond."
Plans announced by the company to improve its cost structure include:
- Reducing headcount by 12-14 percent, or approximately 2,200-2,600 staff
- Reducing planned capital expenditures by approximately $1.9 billion during the period 2007-2008, with a resulting improvement in cash flow
- Closing certain production operations and rationalizing other facilities to achieve improved efficiencies
- Making choices about the highest priorities in research and development and operations that build the framework for future growth.
Amgen stated that it plans to minimize the impact of the targeted reduction in force on our people through the use of attrition, hiring freezes and a voluntary transition program. Amgen staff adversely affected by these initiatives will receive career counseling assistance in securing new employment, the company said.