Amgen’s moves could signal a post-Thousand Oaks future
On the back of its strong financial performance in 2014, Amgen, the Tri-Counties’ largest private employer, is set to begin shifting research operations away from its Thousand Oaks headquarters.
The biopharmaceutical behemoth closed 2014 with impressive earnings, increased dividends, a strong buyback program, approval for a new cancer therapy and a lot of cash on the balance sheet. During a Jan. 13 presentation at the J.P. Morgan Healthcare Conference in San Francisco, Amgen CEO Robert Bradway said the company’s strong performance has enabled it to begin a structural transition to improve operating margins while driving earnings and cash flow growth for investors.
“Our transformation is enterprise-wide. It affects our workforce to the order of 3,500 to 4,000 positions, as we talked about in October,” Bradway said at the conference. “It includes a significant concentration of our geographic footprint with a focus in particular for our research organization in San Francisco and in Cambridge, Massachusetts, and a determination to eliminate redundant facilities here in the U.S. and around the globe, which in aggregate could amount to some 23 percent of our fixed assets.”
Last July, Amgen announced plans to eliminate 610 jobs in Seattle and 50 jobs at a manufacturing plant in nearby Bothell by the end of 2015. The move is expected to deal a blow to the Seattle region’s biotech industry.
Cuyler Mayer, a press representative for Amgen, said its plans for Thousand Oaks have not changed since the company’s announcement in July that it would cut 2,400 jobs globally.
Meanwhile, the drugmaker is expanding its global footprint. In November, it completed construction on what it calls a new-generation manufacturing facility in Singapore, which it hopes to have licensed for production by the end of 2016. The $200 million plant uses innovative technology including single-use bioreactors, continuous purification processing and real-time quality analysis for monoclonal antibody manufacturing — bells and whistles that will help the bottom line.
The project, which began in 2013, was constructed in about half the time as a typical traditional facility and cost about a quarter as much. Moreover, it will manufacture bulk proteins at about a third of the current operating cost.
“This in an approach to manufacturing that we think we enable us to reduce our cost per gram of proteins by an order of magnitude of about 60 percent,” Bradway said.
While the company maintains there are no plans to relocate its headquarters away from Thousand Oaks, a refocusing of its core activities outside Ventura County does not bode well for the region’s future.
“I think the danger is that this might be the first step,” said Sung Won Sohn, director of the Institute for Global Economic Research at CSU Channel Islands. “I’ve seen other companies that gradually start moving operations away from the city — Boeing for example, from Seattle to Chicago, or JCPenny from Chicago to Dallas.
“I can understand from the company’s point of view, but at the same time, from our point of view that would be a tremendous loss for Ventura County,” Sohn said, as Amgen is not only the region’s largest private employer, but also provides high-paying, high-knowledge jobs. In the past, it has also given a boost to innovative ideas and new businesses, helping to foster a strong biotech presence in East Ventura County.
But while Thousand Oaks doesn’t have the metropolitan draw of Seattle or Chicago, it does offer a lower cost of real estate, both residential and commercial, allowing Amgen to pay employees lower wages than it would in, say, San Francisco. Sohn said he likes to think the quality of life is better in Ventura County, and with the Internet enabling remote operations, it may have no real need to relocate its core staff.
“Whenever a company has been around for a long time, those decisions are not made very lightly,” Sohn said. “Right now their people are here, their friends are here, their houses are here, so that’s a strong kind of attachment to an area. They would probably go through a lot of soul-searching, around both economic and other reasons for the relocation.”
Bradway said the consolidation move is the result of “more than a year of work by a group of leaders at Amgen to identify the things we think we need to do well to be a leading company in this industry,” and will give Amgen a competitive edge in the development of its pipeline of drugs, which includes a total of nine biosimilar molecules advancing through clinical development.
Correction: A previously version of this article stated that Amgen would cut 2,400 jobs in Thousand Oaks. The company plans to distribute workforce cuts globally.