Amgen CEO Gets $14M Payday, But Colleagues Who Took Pay Cuts May Disagree
April 6, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
The chief executive officer of booming Thousand Oaks, Calif.-based biotech Amgen will receive a $14 million pay package this year, according to a recent filing with the U.S. Securities and Exchange Commission, despite massive layoffs announced by the company and a downward trend in pay for other executives in Amgen’s C-level suite.
The SEC filing shows that CEO Robert Bradway will earn $14 million in 2015, up from $13.96 million in 2014 and $13.57 million, largely on the strength of Amgen’s Street-beating $6.7 billion in adjusted net income.
His pay, however, will likely ruffle some feathers amongst his executive ranks: Sean Harper, head of Amgen's R&D, saw a pay cut to $5.34 million in 2014, a steep dive from his $6.09 million paycheck in 2012; and Executive Vice President of Global Commercial Operations Anthony Hooper banked only a measly $5.6 million in 2014 from $8.6 million in 2012.
Bradway’s pay is also a potential sore spot for the world’s third largest biotech’s shareholders, who are becoming increasingly concerned about the company’s looming threats from biosimilar drugs. As part of an effort to combat investor anxiety, Amgen has been undergoing widespread restructuring in an attempt to cut costs.
As such, on March 10, Amgen said it will close its South San Francisco facility acquired during its $10 billion buyout of Onyx Pharmaceuticals, Inc. and will lay off 300 of Oynx’s 750 workers, the company said in a memo to employees. Cuts will begin in December 2015.
All of Oynx’s 250 sales and medical staff will now be moved to Amgen’s Thousand Oaks, Calif.-site, while the remaining 200 employees will either be moved to Thousand Oaks or a separate Amgen San Francisco site at Oyster Bay—if they do keep their jobs.
"To build on our competitive presence in the rapidly evolving oncology field, and as part of our ongoing transformation across the company, we have decided to combine Amgen's scale and immuno-oncology expertise with Onyx's highly successful approach to hematologic malignancies," wrote Bradway in the memo. "These combined oncology capabilities will create the focus and efficiency Amgen requires to progress our vision in oncology, and to remain a world leader for the long term.”
The news was not wholly unexpected because Amgen had long said it would do at least some streamlining of functions in order to get redundancies within the Oynx/Amgen deal sorted out.
In October, Amgen (AMGN), said it will use the money it saves from cutting 20 percent of its workforce, or 4,000 jobs, to double down on research, new products and the rollout of its existing blockbuster drug pipeline.
Amgen will improve margin costs by 15 percent by cutting an additional 1,100 jobs to the 2,900 it announced it would axe last summer, the company told analysts in early March. The new corporate model will see a total enterprise annual savings of up to $1.5 billion by 2018, said Amgen in a statement.
As it restructures, the company said it will now focus on the discovery and development of innovative medicines to address serious illnesses, the development of branded biosimilars and global expansion. Amgen saw record high third quarter earnings and revenue and had a blockbuster period for its flagship drugs, despite having to take a $375 million haircut related to massive restructuring moves announced last summer.
“[They] announced about $800 million in operating expense savings by 2018 [which] includes $1.5 billion in savings due to restructuring and future increased Enbre profitability, and partially offset by Onyx Pharmaceuticals, Inc. acquisition costs and growing business costs,” said Mark Schoenebaum, a biotech analyst with ISI Group, in a note to investors. “Due to a new model which includes more variable costs, Amgen has high confidence they can achieve operating margin target going forward.”
Amgen earned $2.30 per share, exceeding analysts' average expectations by 19 cents, and said it now expects 2014 adjusted earnings of $8.45 to $8.55 per share, an even steeper climb than the enhanced estimate it provided in July of $8.20 to $8.40 per share.
The company told analysts it will be creating new manufacturing technologies at a new unnamed facility in a process that they expect could reduce the cost per gram of proteins by 60 percent or more over time.
As part of that push, it will add three new biosimilars to its six existing drugs, adilimumab, trastuzumab, bevacizumab, infliximab, rituximab and cetuximab. Amgen said two of its current biosimilars, infliximab and rituximab, have advanced to the "clinical ready" phase. Amgen's first biosimilar is expected to launch in 2017, followed by four others through 2019.
“On average, Amgen biosimilars cost about $200 million to bring to market,” said Schoenebaum. “[But] Amgen’s target biosimilar market is much larger than the one in which Amgen has existing assets [which means] larger opportunity.”
Hooper, executive vice president of global commercial operations at Amgen, said there will be a potential doubling of Amgen’s product portfolio over the next three years and said the company will pinpoint specialty market experience; the rollout of its current portfolio of growth phase products; and a continuing move into new geographic growth markets.
Approximately $2 billion in sales in new and emerging markets in Asia, Turkey and the Middle East, Latin America, Russia and Eastern Europe are anticipated by 2018."This is an exciting new era for Amgen. We are on the cusp of an important new product cycle with our rich pipeline of innovative and biosimilar medicines that address important societal needs," said Bradway at the time.
As for specific drug markets it could targeting with biosimilars, Amgen estimated that inflammation therapy Enbrel (etanercept) is expected to reach $5 billion in sales ahead of Amgen's biosimilar adililumab launch, while nephrology competitor Sensipar has the potential to reach approximately $1.5 billion in sales before patent expiry in 2018. Bone drug Prolia’s (denosumab) U.S. share has quadrupled over the past two years, annualizing at $1 billion in sales in 2014. Oncology and cardiac drugs will also be a primary part of its new drug strategy, said executives.
"Our significantly expanded global presence and new biomanufacturing technologies give us confidence that Amgen is uniquely positioned to capitalize on the latest wave of opportunity for innovative biologic therapies," said Bradway.
Much of the strength of Amgen’s third quarter earnings rested on the success of its blockbuster drug pipeline. It saw sales of osteoporosis treatment Prolia skyrocket 43 percent to $255 million, while multiple myeloma cancer therapy Kyprolis brought in $94 million, a significant jump from the Street’s consensus estimate of $87 million. Its treatment for raising the white blood cell count, Neulasta, gained 5 percent to $1.19 billion.
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