|
Demand to expand
(Ventura County Star (CA) (KRT) Via Thomson Dialog NewsEdge) Mar. 26--The big kid on the biotechnology block just keeps getting bigger.
Amgen Inc. this year intends to buy a company for more than $2 billion, start two manufacturing facilities that will cost about $1 billion each and hire 2,400 people, many to expand research and development.
The Thousand Oaks company, which has operations worldwide, might see lower earnings-per-share in 2006 than last year to meet those commitments. But sometimes planning for the future takes a little spending in the now.
Amgen's expansion plans should be seen as a way to "boost long-term earnings and profitability at the cost of a relatively modest earnings decline in the immediate future," senior analyst Milena Izmirlieva with World Markets Research Centre in London said in an e-mail.
Though analysts appear to be positive about Amgen's long-term potential, some shareholders have debated whether the world's largest biotech company is making a mistake with all of its spending.
Amgen's declining stock price reflects the uncertainty of investors. The company's stock soared after positive second-quarter earnings, hitting a 52-week high of $86.92 Sept. 20. The price has dropped since to as low as $70.03 in February, but remains well ahead of a 52-week low of $52.19. Amgen stock closed at $73.18 Friday.
Growth takes the dedication of physical facilities, equipment and people.
Amgen will hire about 1,400 people in operations this year, plus another 1,000 people in research and development. The company now employs about 16,400 people worldwide, including 6,700 at its sprawling campus in Thousand Oaks.
The company expects similar growth to continue over the next five years, if not the next decade.
In almost 14 years with Amgen, Kevin Stark said he has seen a lot of expansion, but nothing compared to the depth, breadth and complexity of what is happening now.
The senior director is in charge of coordinating the company's global research and development growth in a cohesive fashion.
Fabrizio Bonanni, senior vice president for manufacturing, is in charge of overseeing increases in production at all of the company's manufacturing sites. The company announced in recent months that it is adding a facility in Ireland and expanding another one in Puerto Rico.
Manufacturing is being boosted to meet demand for drugs already on the market and to handle drugs under development.
"When you start making investments of this nature, size and scale, I see it as physical evidence of the pipeline that we have," Bonanni said.
Amgen is poised to take advantage of its next blockbuster drug sooner rather than later, said analyst Izmirlieva.
One potential candidate, panitumumab, has exceeded expectations in clinical trials. It has been found effective in slowing tumor growth in patients with colorectal cancer. The drug could be even more successful when used earlier in treatment, Amgen officials have said.
Amgen predicts panitumumab could generate $2 billion a year in worldwide sales.
"The actual peak sales amount could be at least 50 percent higher, in our opinion, considering that panitumumab has proven more effective than expected," Izmirlieva said.
It's one reason why Amgen's planned $2.2 billion purchase of its smaller partner, Abgenix Inc. in Fremont, could be a boon for the company in coming years.
The two companies have been developing panitumumab together. They plan to seek Food and Drug Administration approval for the drug this quarter, prompting analysts to speculate that panitumumab could be on the market by the end of the year.
Amgen could see a quick return on its multibillion-dollar investment by taking full possession of the drug.
Abgenix shareholders are scheduled to vote on whether to approve the merger Wednesday.
Amgen also would gain control over Abgenix's Xenomouse technology, which creates monoclonal antibodies without mouse protein. Health officials have said mouse protein that is used in some drugs can cause allergic reactions.
Amgen used Xenomouse technology when creating denosumab, a drug that is being tested for fighting osteoporosis. Abgenix would be owed royalties on denosumab sales if the merger isn't ratified.
Denosumab is in an earlier stage of research than panitumumab, but it appears to have good potential, Izmirlieva said.
Potential drugs in the "pipeline" demand more research -- particularly clinical testing and trials that are required to move drugs closer to applying for FDA approval.
Amgen has increased research and development spending to about $3 billion this year, almost $1 billion more than 2005.
Growth this year will focus on construction projects for boosting operations in South San Francisco and Uxbridge, U.K., Stark said. Increased hiring, however, will take place at all company sites.
"We are expanding rapidly," Stark said. "I don't anticipate we are ever going to have any kind of major leveling off or significant retraction. We have to think about how we can continue to maintain our investment in research."
Investment in research to create new drugs would be in vain without the facilities to produce those drugs.
Hence, Amgen is spending $1 billion to build a manufacturing operation near Cork, Ireland. The project, scheduled to be completed in 2009, will help meet growing demand in Europe.
Manufacturing also is being expanded at a cost of $1 billion in Puerto Rico to boost capacity for drugs produced there -- Epogen, Aranesp, Neupogen and Neulasta. And there will be extra capacity to produce new drugs.
Abgenix's manufacturing facility also will be brought into the fold under the proposed deal. The Fremont biotech firm already has raised both of its production lines to full speed for panitumumab, Bonanni said. He would not be surprised if Amgen adds more employees there as well.
The new drugs require larger doses than some previous drugs, which increases pressure on production and calls for constant examination of the processes used.
"It's definitely not a static environment," Bonanni said. "Productivity is increasing very fast and very rapidly."
He noted that being able to make a large amount of a new product shortly after it is launched provides a competitive advantage.
Toward that end, the company is building facilities that could be used to make several products with a little tweaking. It means less customizing of a site for a specific product, as has been common in the past.
Amgen is not the only company growing these days, though it seems to have dominated the field with announcements of new facilities, acquisitions and hiring efforts.
Rival Johnson & Johnson purchased a company that manufactures implants used to repair wrist fractures in January. The company plans to complete the acquisition of Animus Corp., which produces insulin infusion pumps, by the end of this quarter.
However, the pharmaceutical giant was shut out of its bid for Guidant Corp. by Boston Scientific.
Another competitor, Genentech, recently purchased a manufacturing facility in Oceanside that it expects to receive FDA approval by 2007.
The biotech company also is building a manufacturing facility in Vacaville.
Amgen's major growth is outside of Thousand Oaks, but company officials emphasized that it does not mean the company is pulling away operations from its home base.
"Thousand Oaks will remain a vibrant research and development hub," Stark said.
He said the company is expanding in other sites to take advantage of the talent in those areas and does not anticipate any major relocations from Thousand Oaks.
Amgen is limited from adding production in Thousand Oaks because of the location, but the site continues to be a big producer, particularly in developing drugs for clinical studies, Stark said.
Amgen officials said the company is putting itself in a good competitive position for the future.
"By accumulating more and more experience in this technology, we have the ability to bring new molecules to the marketplace," Bonanni said.
ON THE NET: http://www.amgen.com
[ Back To TMCnet.com's Homepage ]
|
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, February 2-4, 2009. Miami, Florida.
