Amgen Team 2: Joshua Zamarron, James Stariha Elizabeth Allen, Michael Johnson Michael Mullin
Jan 16, 2016
Amgen
Team 2: Joshua Zamarron, James Stariha
Elizabeth Allen, Michael Johnson Michael Mullin
Industry AnalysisStrong growth rate
Barriers to Enter
Competition
Threat of Substitutes
Power of Buyers
Growth/Profit Potential
Growth RateEstimated market value in 2016 is $453 Billion
Government Initiatives
Increased Research and Development funding
Countries becoming major marketsChina, India, Europe
Mergers and AcquisitionAmgen and Immunex
Barriers to EnterLikelihood is weak
Majority startups are spin offsBased on innovative products of processes
resulting from discoveries in academic researchLong start up periods with little profitHigh fixed costs
Not enough funding (research and development)
Government Regulations
CompetitionMore than 1,000 Biotech companies in North
America
Top 1% of these companies making majority of revenue
Competition for patents
Good for Industry
Buyer PowerRanges from Healthcare providers to farmers
and growers
AmgenHealthcare providersHospitals
Specialized products don’t allow for much buyer power
Growth/Profit Potential
Market Value $453 Billion
Environmental Threat and Opportunity Profile (ETOP)
An environmental threat and opportunity profile is a description of the structure of external factors.
Multiple Reasons for an ETOP
1. It helps the organization to identify opportunities and threats
2. Consolidates and strengthens an organization’s position
3. Provides strategists information on which sectors have a favorable impact on the organization
4. The organization gains knowledge of its standing with respect to its environment
5. Helps formulate strategies.
Steps in an ETOP1. Identify major Environmental factors such as:
economic, political, social, technological, competitive, geographical, etc.
2. Environmental factors are then sub-divided into subsectors of each factor.
3. These factors are then analyzed to determine major weaknesses and strengths in each of the subsectors.
4. The impact of each factor is then accessed as being either favorable, unfavorable, or neutral.
Economic FactorsEconomic factors affect the purchasing power of
potential customers and the firm’s cost of capital.
These factors include: business cycle, inflationary trends, consumption, employment, investment, monetary, and fiscal policies.
Exp: The most recent fiscal policy event that has happened, is that buried within the Fiscal Cliff Section 632, is a clause that delays Medicare price restraints on a class of drugs including Sensipar. This provision leads to Amgen having two more years to sell Sensipar without governmental controls. The delay of Medicare price restraints has a positive effect on Amgen.
Political FactorsPolitical factors are how and to what degree
government intervenes in the economy.
Political factors include: political power, ideologies, interest groups, social stability, legislation, and regulation.
Exp: One of the most recent and controversial legislations passed was the United States health care reform. Amgen expects a drastic increase of competition in future years due to this legislation. The legislation allows the approval of biosimilars, generic biotech drugs, to take significantly shorter time
Social FactorsSocial factors impact an organization due to the
social, cultural, demographic, and environmental profiles in the industry.
Social factors include: age distribution, geographic distribution, income distribution, mobility, education, family values, and business attitudes.
Amgen strives to encourage a high-performing environment where team members embrace the talents and backgrounds of each other as well as nourish innovative thinking, and achieve their full ability and potential that leads to Amgen’s success.
Technological FactorsTechnological factors impact how an organization
or company operates in relation to equipment used in the company’s environment.
Technological Factors include: rate of technological change, future raw material availability, raw material cost, technological developments, and product life cycle.
CEO Robert Bradway announced during a lecture at MIT that he believes the company is “on the cusp of a major change in how we manufacture proteins.”
Geographical FactorsGeographical Factors are important to the overall
analysis of a company.
Geographical factors include: plant/warehouse location, relocation of facilities, headquarters, and foreign markets.
Although the United States markets contribute to more than 75% of Amgen’s Annual revenues, Amgen has been working to increase its reach in international and foreign markets. The company has extended its products to high-growth regions such as Japan, China, Russia, and Africa.
Amgen SWOT AnalysisStrengths Weaknesses
•Expertise in R&D of protein therapeutics helped Amgen build strong product portfolio•Neulasta, Neupogen and Enbrel driving Amgen’s top-line growth•Strong IPR position enabling Amgen to offset biosimilar •Restructuring initiatives driving significant profit growth during a period of declining sales
•Declining sales of Aranesp and Epogen•Discontinuation of late stage clinical trials•Relatively low levels of technology diversification increasing dependency on therapeutic proteins
Opportunity Threats
Expanding Prolia franchise could drive top-line growth, and reduce Amgen’s dependency on protein therapeutics Acquisitions could strengthen Amgen’s pipelineFocus on the emerging economies providing growth opportunitiesCollaboration with Watson could help Amgen enter oncology biosimilars market
•Affymax’s Omontys likely to affect Aranesp and Epogen sales•Cost containment measures may affect Amgen’s sales growth
Strengths Expertise in R&D
Top of industry Breakthroughs in PEGylation and Glycosylation
techniques increased drug effectiveness Directly responsible for development of next strength
Neulasta, Neupogen, and Enbrel driving top-line growth Developed from PEGylation and Glycosylation
techniques (from 3-4 hrs to 15-80 hrs) Amgen’s top three products contributing to over 55% of
revenues Neulasta/Neupogen- $5.2 billion in sales 2011
StrengthsStrong IPR position enabling Amgen to offset
biosimilar competition Highly innovative industry and protecting
proprietary property is essentialStrong R&D means nothing if it is not protectedSuccessfully defended property numerous times
including 10 claims of infringement on 4 of Amgen’s EPO patents that led to a permanent injunction against Swiss big Pharma Roche from ever selling its products in the US
WeaknessesDeclining sales of Aranesp and Epogen
Concerns raised about safety of the drugsFDA issued black boxed warnings of increased
chance of death and other cardiovascular disease In 2006 sales reached 10 billion
Discontinuation of late stage clinical trialsTwo trials in phase III failed due to statistics that
they had no real effects Extremely expensiveDid not look good having back to back failures
WeaknessesRelatively low levels of product diversification
3 most successful products are all protein therapeutics-55% of revenues
Other companies pulling ahead in promising medicine of protein anti-bodies, small molecule, and limited MAB’s drugs
Therapeutic anti-body market is estimated to be the fastest growing market through 2015
IPR could limit future growth in markets (same that protected their PEGylation and Glycosylation from others)
Opportunity Expanding Prolia Franchise could drive top-line growth
In 2012 FDA released new indicator for Prolia as a treatment to increase bone mass in men
Showed significant increases in safety and efficacy (%5.7 vs %.9) Been in the US markets for sometime with sales hovering at $88 million,
first quarter after new indicator sales went up to $120 million Huge new market for Amgen (12 million conflicted) Relieve pressure off of Therapeutic protein revenues
Acquisitions could strengthen Amgen’s pipelines Recently acquired two firms Micromet and KAI pharmaceuticals Acquired not only pipelines but the proprietary technology of the
companies Including multi promising drugs in phase I and phase II of research, one
is BiTE anti-body technologies If they pan out would significantly increase their product diversity
OpportunityFocus on emerging economies providing growth
opportunity Over past 4 years have expanded from 35
countries to 50 Including Brazil and TurkeyBrazil top ten Pharmaceuticals market in the world
and by 2015 it is estimated to be fifthWith more plans to increase to 75 countries by
2015 (helps with diversity)
Threats Affymax’s Omontys likely to affect Aranesp and Epogen sales
FDA approved their Peginesatide injection Likely to outperform Amgen’s and only need injections once a
month vs. 3 times a week Combined with the safety concerns already raised future does
not look good
Cost containment measures may affect Amgen’s sales growth Amgen relies heavily on reimbursements from government aid
programs and private third party payers Health care reform huge threat to those revenues Already seen a %2 percent reduction in government payouts for
all Medicare services, and several more already put forth
Matching S&W with O&T
•Relatively low levels of product diversification
•Expertise in R&D
•Strong IPR
•Declining Aranesp and Epogen sales
•Cost containment measures
•Acquired multiple firms with proprietary technologies and promising new products
•Entering emerging economies
•Expanding Prolia franchise
•Failure of late stage clinical trials
Competitive FactorsCompetitive forces at work in the industry and
their strength
Companies in the strongest/weakest competitive position
Keys to competitive success
Amgen’s Top CompetitorsJohnson & Johnson
Novartis AG
Teva Pharmaceutical Industries Limited
Amgen’s Financial Analysis
Net income, sales, and operating expenses
Current ratio is 3.8
Asset turnover ratio is 0.32
Debt-to-equity ratio for 2012 is 1.85
Net profit margin is 0.25
Return on equity is 0.22
Return on assets is 0.08
Market Share
Managerial FactorsThe Scientific Method
Teams
Diversity
Technical Factors
ManufacturingFacilities
Collaboration
Senior ManagementRobert A. Bradway: Chairman andChief
Executive Officer
Madhavan Balachandran: Executive Vice President, Operations
Victoria H. Blatter: Senior Vice President, U.S. Government Affairs
Suzanne Blaug: Senior Vice President, Global Marketing and Commercial Development
Senior Management Cont.Paul R. Eisenberg: Senior Vice President, Global
Regulatory Affairs and Safety
Sean E. Harper: Executive Vice President, Research and Development
Rolf K. Hoffmann: Senior Vice President, U.S. Commercial Operations
Anthony C. Hooper: Executive Vice President, Global Commercial Operations
Senior Management Cont.Raymond C. Jordan: Senior Vice President, Corporate
Affairs
Diana L. McKenzie: Senior Vice President and Chief Information Officer
Brian M. McNamee: Senior Vice President, Human Resources
Joshua J. Ofman: Senior Vice President, Global Value and Access
Cynthia M. Patton: Senior Vice President and Chief Compliance Officer
Senior Management Cont.Jonathan M. Peacock: Executive Vice President
and Chief Financial Officer
David J. Scott: Senior Vice President,General Counsel and Secretary
Michael Severino: Senior Vice President,Global Development and Corporate Chief Medical Officer
Board of DirectorsDavid Baltimore: President Emeritus and Robert
Andrews Millikan Professor of Biology, California Institute of Technology
Frank J. Biondi, Jr.: Senior Managing Director, WaterView Advisors LLC
Robert A. Bradway: Chairman and Chief Executive Officer, Amgen Inc.
François de Carbonnel: Former Chairman of the Board and Director, Thomson S.A. and Director of Corporations
Board of DirectorsVance D. Coffman (Lead Independent Director):
Retired Chairman of the Board and CEO, Lockheed Martin Corporation
Robert A. Eckert: Former CEO and Chairman of the Board, Mattel, Inc
Rebecca M. Henderson, Ph.D: John and Natty McArthur University Professor, Harvard University
Frank C. Herringer: Chairman and Retired CEO, Transamerica Corporation
Board of DirectorsTyler Jacks: David H. Koch Professor of Biology,
Massachusetts Institute of Technology and director of the David H. Koch Institute for Integrative Cancer Research
Gilbert S. Omenn: Professor of Internal Medicine, Human Genetics & Public Health and Director of the Center for Computational Medicine and Bioinformatics, University of Michigan, and former CEO, University of Michigan Health System
Judith C. Pelham: President Emeritus, Trinity Health
Board of DirectorsAdm. J. Paul Reason, USN (Retired): Former Vice
Chairman and President, Metro Machine Corporation
Leonard D. Schaeffer: Senior Advisor, TPG Capital
Ronald D. Sugar: Chairman Emeritus, Northrop Grumman Corporation
Assessment
Importance of Culture
Compatibility with Strategic Change