BITTER PILL FOR AMGEN BIOTECH GIANT TO SLICE 2,200 JOBS, SHRINKING TO MAINTAIN PROFIT.

Byline: BETH BARRETT and BRENT HOPKINS

Staff Writers

Beleaguered Ventura County biotech giant Amgen announced a sweeping restructuring Wednesday that calls for at least 2,200 job cuts, including layoffs, and downsizing at its sprawling local campus.

Squeezed by federal restrictions on some of its biggest-selling drugs, Amgen said it also will scale back capital spending by about $1.9 billion, reduce research and development, and close some production operations.

Job cuts at the company's 8,300-employee Thousand Oaks headquarters were not immediately disclosed, but city officials said they expect about 800 to 900 people to be affected. The company has 20,000 workers worldwide.

"Downsizing is one of the most difficult things a company can do. We are deeply saddened by our need to do this," Amgen Chief Executive Kevin Sharer said in an afternoon conference call.

"It's not been an easy year or one we expected, but great companies prove themselves in times of trial."

Amgen said the downsizing was primarily driven by a steep drop in revenue from sales of Aranesp, one of the company's top drugs, used to fight anemia, amid federal safety concerns and caps on Medicare oncology reimbursements.

The company is fighting to modify those federal actions, but faces another hearing in September on its anti-anemia drugs that could further affect sales.

"It's a disconcerting story, but the jungle drums had been beating for a while that this was coming," said Jack Kyser, chief economist for the nonprofit Los Angeles County Economic Development Corp.

"Amgen was the big dog in the local industry, so people are going to have to scramble a little bit to find jobs these days."

Across the pharmaceutical industry, employers have been slashing positions all year. Pfizer decimated its work force in January, cutting 10,000 employees. Last month, Johnson & Johnson followed with a 4,800-job-cut announcement -- about 4 percent of its work force.

Several weeks ago, British drugmaker AstraZeneca added an additional 7,600 layoffs, roughly one-tenth of its employees.

Amgen's cuts seem even more striking, however, since it had seemed virtually untouchable for its first 27 years in existence.

Riding high on blockbuster drugs including Epogen, Neupogen and Aranesp, the biotech giant racked up billions of dollars in sales.

Aranesp and its forerunner Epogen accounted for about half of the company's $14.3 billion in revenues last year, and about 60 percent of its profit.

And over the years the company has reinvested heavily in research -- and its employees.

As it built up its sprawling campus in Thousand Oaks, the company instilled a "work-hard, play-hard" philosophy that blended intense scientific study with light-hearted pursuits including beer and pizza, volleyball games and lavish holiday parties.

Largest employer

The 130-acre center boasts five restaurants, a fitness center with gourmet waters free to athletes and a farmers market.

Amgen grew so big it became Ventura County's largest civilian employer, with 10 percent of Thousand Oaks' work force.

But the Food and Drug Administration issued safety warnings in March, and with Medicare limits on reimbursements, Amgen's second-quarter U.S. sales of Aranesp -- its biggest-selling drug -- dropped 19 percent, to $578 million compared with $713 million for last year's quarter.

The FDA warning applied to Epogen and Procrit, identical to Epogen, which Amgen makes and licenses for Johnson & Johnson.

The warnings, the FDA's strongest, came after the agency said clinical trials indicated that when the drug was prescribed above certain doses, the risk increased of death from heart disease in kidney patients, and of accelerated tumor growth in cancer patients.

Doctors were encouraged to use the lowest doses necessary.

Amgen has repeatedly disputed the federal actions, saying they have no scientific basis, are not compatible with good clinical practice and limit the availability of the drugs to cancer patients.

At the same time, the company says it is working to broaden its product line, and has other drugs in late-trial stages.

Pressures on Amgen

But competition in the multibillion-dollar international drug arena is fierce, with millions of dollars spent on high-powered lobbyists as Congress considers legislation that could make it easier to get generic drugs into the market.

Epogen's U.S. patent is set to expire in 2013.

And Amgen also faces international pressures, including from Swiss drug manufacturer Roche, which is trying to break into the U.S. market with its own drug, Mircera.

Amgen filed a patent-infringement lawsuit against Roche Holding AG in 2005, which is still pending.

At Amgen's sprawling Thousand Oaks headquarters, the mood among employees Wednesday afternoon appeared relatively upbeat.

Impending job cuts had been rumored among employees for weeks and the definitive announcement brought a certain sense of relief, according to employees leaving work Wednesday afternoon.

Some cuts have already taken place over recent months, employees said, and the announcement Wednesday came as no surprise.

Amgen uses a large number of contracted employees, according to several veteran workers, and talk among some employees was that more work would shift to such types of employees in the future.

Sarah Roberson, who has worked in food services at Amgen for a year and a half, said that in the past three or four months, her division has already experienced up to 50 percent cuts in some positions.

"There will probably be more (cuts)," she said. "If they cut back jobs, it'll mean fewer mouths to feed and fewer of us to feed them."

Thousand Oaks city officials bemoaned repercussions from the cutbacks at the Fortune 500 company -- the country's eighth-largest pharmaceutical company.

"These reductions will touch many families in our community," Thousand Oaks Mayor Andy Fox said in a statement.

'Not much choice'

But analysts said Wednesday that the restructuring is a critical step in keeping Amgen profitable as it faces a possible 40 percent drop in revenue next year on its anti-anemia drugs.

"Unfortunately, when you're a drug company and all your main drugs are having problems or being recalled, there's probably not much choice for them," said Jon Ogg, an analyst and editor with 247wallst.com.

"They're going to be a much smaller company."

Mark Schoenebaum, a biotechnology analyst with Bear, Stearns & Co., echoed that view. "Amgen unfortunately has a business that's going to be significantly smaller within a year," he said. "It's an unfortunate, but undeniable, truth.

"From a human perspective and the people who will lose jobs, it's horrible. ... From a business perspective, it will safeguard the future of Amgen, and (as such) is a bold and extraordinarily wise move by the management team."

Staff Writer Tony Castro contributed to this report.

beth.barrett(at)dailynews.com

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Amgen at a glance

World's largest biotechnology company by sales

Founded: 1980

Headquarters: Thousand Oaks

Worldwide locations: Include Japan, England, Canada, United Arab Emirates, Russia, Mexico.

Employees: 20,000; about 8,300 in Thousand Oaks

Chairman and CEO: Kevin W. Sharer 

2006 revenue: $14.3 billion

Main products: Anti-anemia drugs Aranesp and Epogen, and Enbrel, an inflammatory disease drug.

Restructuring highlights

Cut about 2,200 to 2,600 employees

Cut capital expenditures by about $1.9 billion

Close some production operations

Prioritize research and development

Most initiatives expected to be completed by 2008

Expected $1 billion cost savings

CAPTION(S):

2 photos, box

Photo:

(1 -- color) A shuttle bus chauffeurs employees around the Amgen campus in Thousand Oaks, where officials have announced significant reductions in work force and downsizing.

(2) Amgen, Ventura County's largest employer, announced Wednesday that it will cut 2,200 jobs and restructure and downsize throughout the biotech company.

John McCoy/Staff Photographer

Box:

Amgen at a glance (see text)