The world’s leading biotechnology group Amgen has suffered a knock from dwindling sales of its flagship anaemia drug Aranesp, leading the firm to announce job cuts of 2,200-2,600, equating to 12%-14% of its workforce.

Amgen says the move and other drives to boost operational efficiency, such as closing certain production facilities, should reap pre-tax savings of around $1.0-$1.3 billion in 2008, helping it to maintain “industry-leading levels” of investment in research and development.

But some analysts have voiced concerned about the planned reduction in R&D spend to 20% of sales (23% of sales in 2006), with Morgan Stanley analyst Steven Harr accusing the firm during a conference call of cutting R&D instead of diversifying its business to reduce its reliance on its anaemia franchise.

The company was also forced to lower its earnings guidance for the full year to $4.13-$4.23 a share from the earlier $4.28 target, after reporting a 10% drop in Aranesp’s (darbopoietin alfa) second-quarter revenues to $949 million last month.

Aranesp brought home sales of $4.12 billion in 2006, but its performance was hit earlier this year after safety concerns caused US regulators to slap a stronger label warning on the drug regarding its use in cancer patients, recommending the use of the lowest dose possible.

Further sales decline

Furthermore, the Center for Medicare and Medicaid Services’ plan to set new guidelines for erythropoietin stimulating agents will drastically cut reimbursements and prescriptions of anaemia drugs, and Bernstein Research analyst Geoffrey Porges believes that "Amgen will likely lose at least 40% of their US Aranesp revenue by 2008 with even greater downside possible for both Aranesp and Epogen (epoetin alfa) if upcoming reimbursement and regulatory decisions go against them."

Kevin Sharer, Amgen's chairman and chief executive officer, described the initiatives as being in response to a new reality, “taking account of reduced revenues and appropriately lowering costs across the company,” and he maintains “these changes will also position Amgen for success in 2008 and beyond.”