Amgen

Team 2:
Joshua Zamarron, James Stariha
Elizabeth Allen, Michael Johnson
Michael Mullin

Industry Analysis
Strong growth rate
Barriers to Enter
Competition
Threat of Substitutes
Power of Buyers
Growth/Profit Potential

Growth Rate
Estimated market value in 2016 is $453 Billion
Government Initiatives
Increased Research and Development funding
Countries becoming major markets
China, India, Europe

Mergers and Acquisition

Amgen and Immunex

Barriers to Enter
Likelihood is weak
Majority startups are spin offs
Based on innovative products of processes
resulting from discoveries in academic research
Long start up periods with little profit
High fixed costs

Not enough funding (research and development)

Government Regulations

Competition
More than 1,000 Biotech companies in North
America

Top 1% of these companies making majority of

revenue

Competition for patents

Good for Industry

Buyer Power
Ranges from Healthcare providers to farmers
and growers

Amgen
Healthcare providers
Hospitals

Specialized products dont 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 organizations 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 ETOP
1. 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 Factors
Economic factors affect the purchasing power of
potential customers and the firms 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 Factors
Political 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 Factors
Social 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 Amgens success.

Technological Factors
Technological factors impact how an organization or
company operates in relation to equipment used in
the companys 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 Factors
Geographical 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 Amgens 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 Analysis

Strengths
Expertise in R&D of protein
therapeutics helped Amgen build
strong product portfolio
Neulasta, Neupogen and Enbrel
driving Amgens top-line growth
Strong IPR position enabling
Amgen to offset biosimilar
Restructuring initiatives driving
significant profit growth during a
period of declining sales

Opportunity
Expanding Prolia franchise could
drive top-line growth, and reduce
Amgens dependency on protein
therapeutics
Acquisitions could strengthen
Amgens pipeline
Focus on the emerging economies
providing growth opportunities
Collaboration with Watson could
help Amgen enter oncology
biosimilars market

Weaknesses
Declining sales of Aranesp and
Epogen
Discontinuation of late stage
clinical trials
Relatively low levels of
technology diversification
increasing dependency on
therapeutic proteins
Threats
Affymaxs Omontys likely to
affect Aranesp and Epogen
sales
Cost containment measures
may affect Amgens 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)
Amgens top three products contributing to over 55% of
revenues
Neulasta/Neupogen- $5.2 billion in sales 2011

Strengths
Strong IPR position enabling Amgen to offset
biosimilar competition
Highly innovative industry and protecting
proprietary property is essential
Strong R&D means nothing if it is not protected
Successfully defended property numerous times
including 10 claims of infringement on 4 of
Amgens EPO patents that led to a permanent
injunction against Swiss big Pharma Roche from
ever selling its products in the US

Weaknesses
Declining sales of Aranesp and Epogen
Concerns raised about safety of the drugs
FDA issued black boxed warnings of increased
chance of death and other cardiovascular disease
In 2006 sales reached 10 billion

Discontinuation of late stage clinical trials

Two trials in phase III failed due to statistics that
they had no real effects
Extremely expensive
Did not look good having back to back failures

Weaknesses
Relatively 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 MABs 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 Amgens 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

Opportunity
Focus on emerging economies providing growth
opportunity
Over past 4 years have expanded from 35
countries to 50
Including Brazil and Turkey
Brazil top ten Pharmaceuticals market in the world
and by 2015 it is estimated to be fifth
With more plans to increase to 75 countries by
2015 (helps with diversity)

Threats
Affymaxs Omontys likely to affect Aranesp and Epogen sales
FDA approved their Peginesatide injection
Likely to outperform Amgens 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 Amgens 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

Acquired multiple firms with

proprietary technologies and
promising new products

Expertise in R&D
Entering emerging economies
Strong IPR
Expanding Prolia franchise
Declining Aranesp and Epogen
sales
Cost containment measures

Failure of late stage clinical trials

Competitive Factors
Competitive forces at work in the industry and
their strength

Companies in the strongest/weakest competitive

position

Keys to competitive success

Amgens Top Competitors

Johnson & Johnson

Novartis AG

Teva Pharmaceutical Industries Limited

Amgens 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 Factors
The Scientific Method

Teams

Diversity

Technical Factors
Manufacturing
Facilities

Collaboration

Senior Management
Robert 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 Directors
David 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.

Franois de Carbonnel: Former Chairman of the

Board and Director, Thomson S.A. and Director of
Corporations

Board of Directors
Vance D. Coffman (Lead Independent Director):
RetiredChairman 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 Directors
Tyler 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 Directors
Adm. 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