Amgen has received a boost from an analyst’s upgrade and report which claims that the US biotechnology firm’s profits will increase so long as it responds to its recent problems concerning its anaemia drugs by restructuring.

The rumour mill has been awash with stories that Amgen is on the verge of announcing major job cuts, a position it may have been forced into by the attacks from all sides against Aranesp (darbopoietin alfa) and Epogen (epoetin alfa). The effect of label changes, concerns over the safety of erythropoietin stimulating agents and changes in reimbursement have all taken their toil on the firm’s share price.

Amgen’s management, in a filing to the US Securities and Exchange Commission last Friday, said that “as a result of these challenges, we have commenced a global review of the company's business plans to identify opportunities to improve our cost structure in response to any resulting declines in revenues". The firm added it will “refocus spending on critical R&D and operational priorities and seek greater efficiencies in how we conduct our business”.

Amgen has said nothing more specific but some changes would appear to be afoot and Geoffrey Porges at Bernstein Research thinks that a swift restructuring will help greatly. He upgraded the stock to ‘outperform’ from ‘market perform,’ and raised his price target to $69 per share from $65, while predicting that the company will announce a plan before September 11, when it is due to discuss the safety of its drugs Aranesp and Epogen with the US Food and Drug Administration.

The Center for Medicare and Medicaid Services’ plan to set new guidelines for ESAs will drastically cut reimbursements and prescriptions of anaemia drugs and Mr Porges noted 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 if upcoming reimbursement and regulatory decisions go against them".

However if Amgen cuts costs, continues to buy back stock and improves its tax rate, the analyst argued, it could increase its earnings per share by 10%-12% each year from 2008 to 2011 and achieve savings of $250 million to $1 billion between now and 2010. This can be achieved even if it does not develop any other significant drug candidates, Mr Porges concluded.