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Amgen cuts jobs at Thousand Oaks headquarters as drug focus narrows

By   /   Friday, August 1st, 2014  /   Comments Off

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Thousand Oaks-based biotech giant Amgen is the region's largest private employer and only blue-chip stock. (Amgen courtesy photo)

Thousand Oaks-based biotech giant Amgen is the region’s largest private employer and only blue-chip stock. (Amgen courtesy photo)

 

Thousand Oaks-based biotech giant Amgen has entered a new era in which a leaner organization focuses on shepherding 10 late-stage molecules into an increasingly competitive global market.

Amgen said July 29 that it will cut staff at its Conejo Valley headquarters and consolidate into fewer buildings as part of a company-wide restructuring plan that will eliminate between 2,400 and 2,900 jobs, predominately in the United States, and shutter facilities in Colorado and Washington.

While Amgen’s headquarters will remain in the Conejo Valley, where it is Ventura County’s largest private-sector employer with a staff of about 6,000, there is little question that its gaze has shifted abroad with the opening of a research facility in China and the purchase of a major drug distribution firm in Turkey.

“We’ll retain our headquarters in Thousand Oaks, albeit with a reduced staff,” CEO Robert Bradway said in an earnings call with investors on July 29.

The move comes just days after Sandoz, the generics arm of fellow drug giant Novartis, fired the first formal shot across Amgen’s bow when it submitted an application for a drug that would mimic Neupogen. Amgen’s Neupogen brought in $5.8 billion of the firm’s $18.1 billion in product sales in 2013, and the patent on it expired at the end of last year.

Amgen said the layoffs and slashing of its facilities footprint by 23 percent are designed to reduce operating expenses by $700 million by 2016, money that it plans to reinvest to support new drug launches around the globe. The company said the cuts will constitute between 12 and 15 percent of its 20,000-member workforce. Amgen didn’t specify how many of the cuts would come at Thousand Oaks, although a Business Times analysis suggests it could be as many as 1,800 or as few as none.

“The talented staff members in Thousand Oaks have made enormous contributions to advancing biotechnology over the years and the surrounding community has been very supportive,” the company said in a statement.
Amgen spokeswoman Kristen Davis said Amgen will offer a “voluntary transition program” to qualifying employees to help mitigate the impact of the restructuring.

“The voluntary transition program provides an enhanced benefits package to those staff members who may be ready to move on to another career or to pursue other interests,” Davis said in an email to the Business Times.

The staff cuts will play out over the next several months. Amgen said it will begin exiting its Washington and Colorado facilities, which are largely research and development sites, in the fourth quarter. Going forward, its R&D operations will be concentrated in South San Francisco and Cambridge, Massachusetts.

Amgen's corporate headquarters in Thousand Oaks (Amgen courtesy photo)

Amgen’s corporate headquarters in Thousand Oaks (Amgen courtesy photo)

The impact on Thousand Oaks won’t be known immediately.

The Washington and Colorado closures account for about 1,090 jobs, meaning 1,300 to 1,800 cuts must come from elsewhere in the U.S. or Puerto Rico.

However, about 3,400 employees company-wide are eligible for the voluntary transition program, and the final number of job cuts will depend on how many workers take that option.

But any blow to the Thousand Oaks headquarters is likely to be felt in the broader Ventura County economy. Historically, the county’s median income has risen and fallen in lockstep with Amgen’s performance.

“They’re still big enough that they can swing the data with a big payout or layoff,” said Bill Watkins, economist with the Center for Economic Forecasting and Research at California Lutheran University in Thousand Oaks. “The way I look at Ventura County, they’re one of two big employers, and the other one is the military.”

One hope is that laid-off employees will remain and start companies of their own. While the Conejo Valley isn’t an industry hub on the order of the Bay Area, Amgen has spun out Atara Biotherapeutics, which has raised $52 million. Amgen alumni have founded Westlake Village-based Kythera Biopharmaceuticals and Thousand Oaks-based ImmunGene.

“It’s unfortunate for the people that are being laid off. But from the company’s point of view, the global pharmaceutical market is changing, and they’re under pressure just like all pharmaceutical companies to keep profits up,” said Greg Cauchon, a former Amgen scientist who started the Ventura BioCenter in Thousand Oaks to foster biotech startups in the county.

“Those of us here in the BioCenter hope some of those people will come here and start businesses and become part of our research community. We hope to create the next round of businesses that will sustain the local economy,” he said.

Real estate resizing

Amgen’s move will have an impact on the commercial real estate market in the region. The company occupies about 3.7 million square feet of building space on 120 acres in Thousand Oaks. It plans to reduce that footprint, said Amgen spokeswoman Davis.

“As a result, we expect to close several buildings and sell some of the buildings on the outlying areas of our central campus. We are actively engaging in discussions with third-parties about potential future use of the facilities,” she told the Business Times in an email.

The Amgen real estate resizing would almost certainly mean that space the company has leased but not occupied at The Arbors, an office park with frontage on Highway 101, would come back on the market. Knowledgeable real estate sources said the company had leased between 35,000 and 70,000 square feet in a building at the Arbors but never moved in staff. Terms of the lease were not disclosed. Amgen said it would not comment on specific parcels that might be sold or subleased.

“The commercial office space market hasn’t fully covered,” said Watkins, the economist, “and a whole bunch of [vacant] space won’t do anything to help prices.”

1,500 jobs cut since 2006

A scientist works in a lab at Thousand Oaks-based Amgen. (courtesy photo).

A scientist works in a lab at Thousand Oaks-based Amgen. (courtesy photo).

The restructuring at Amgen comes after several years of smaller job cuts since the company’s ranks peaked in the Conejo Valley in the mid-2000s.

In June, Amgen confirmed plans to lay off 70 people, primarily in its information systems department at its headquarters. Those cuts brought the total number of jobs eliminated since 2007 to 1,223, according to Business Times records and research.

In 2007, the company cut 675 jobs in Ventura County in the first major layoff in its history. In 2011, it eliminated 226 positions in Thousand Oaks as part of sweeping changes to its research and development operations. Earlier this year, Amgen eliminated 252 jobs in Thousand Oaks.

Before the layoffs announced July 29, Amgen had about 6,000 workers in Thousand Oaks. In late 2006, the company told the Business Times it had about 7,500 employees in Ventura County.

Amgen also disclosed its third-quarter earnings on July 29. Revenues rose 11 percent to $5.2 billion and profits increased 25 percent to $2.37 per share, beating analyst expectations of $4.9 billion and $2.07 per share, respectively.
Shares were up 5.7 percent to $130.31 in midday trading July 30 as the Business Times went to press.

Scott Mitnick, city manager of Thousand Oaks, said that despite the job cuts, he was encouraged to hear Amgen was keeping its headquarters in the city.

But he said city officials will focus on making the city an attractive destination for businesses of all types.

“I look at this with mixed feelings. On one hand, it’s good for Amgen as a company and Thousand Oaks over the long term. But in the shorter term, any time you lose these kind of numbers, it causes you to raise your eyebrow and wonder what’s next,” Mitnick said. “This situation with Amgen serves as a wake up call that cities like Thousand Oaks can’t sit back and rest on our laurels.”

Marlize van Romburgh and Henry Dubroff contributed reporting.

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