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How Amgen makes money? Understanding the Business Model of Amgen


Nov 2, 2022
Amgen makes money

Amgen Inc., a biotechnology pioneer, is one of the world’s most respected independent biotechnology companies. It uses advanced biotechnology tools and human genetics to develop manufacture and innovative market therapeutics for humans. Amgen was founded in California in 1980. It became a Delaware corporation by 1987. Amgen is a company that specializes in human therapeutics.

Understanding Biotechnology Business

The first bread baker, brewers, and cheese makers are the foundation of modern biotechnology companies. They taught us how microorganisms could produce everyday edible products like beer, bread, cheese, and other beverages.

A better understanding of biology, including molecular connections between disease pathways and methods to manipulate microorganisms, has led to new opportunities in medical diagnosis and new technologies such as sequencing the human genome and industrialization. The new field of biopharmaceuticals, which uses biotechnology to create medicinal compounds, is revolutionizing the pharmaceutical market.

Recombinant DNA is a technique used by biotechnology companies to create innovative medicines. This involves isolating a human therapeutic gene or genetically engineering it to create a therapeutic one. Then, the potential therapeutic is introduced into bacteria, yeast, or another animal cell line. Recombinant systems can be induced to produce high amounts of protein under controlled conditions. Biotechnology companies can produce large quantities of highly purified proteins for clinical and commercial therapeutic purposes. The first biotechnologically produced medicine was human insulin.

Understanding Amgen’s Business Model

Amgen, Inc. is a biotechnology sector leader, transforming itself from a drug development company to a biopharmaceutical manufacturing company with consistent revenue growth. Amgen’s transformation is mainly due to the two gene-spliced medicines, Neupogen and Epogen. The company is a single business segment that focuses on human therapeutics. It also offers products in six therapeutic areas.

Oncology/Haematology: The company offers nine innovative products and one biosimilar in this therapeutic area.

Innovative Products: Kyprolis and Xgeva are innovative products.

Biosimilar Amgen launched Citucximab in the market and is currently conducting Phase-3 trials of Trastuzumab and Bevacizumab.

Cardiovascular: Amgen has Repatha, Omecamtiv, Omecamtiv, and mecarbil products to treat cardiovascular diseases.

Inflammation Enbrel is the company’s innovative product. The biosimilars are currently developing for Infliximab Adalimumab, AMG 157, and Infliximab.

Bone Health – Amgen offers Prolia. Another product Romosozumab is currently in Phase-3 development.

Nephrology, The company offers Epogen and Sensipar, Mimpara, Aranesp, and another product Parsabiv, which is currently in clinical development.

Neuroscience Amgen works on Erenumab and BACE in this therapeutic segment

Understanding Biotechnology Business Model

Regulations prohibit biotechnology companies from selling medicines directly to patients. Companies reach out to patients through influencers (Providers/Physicians). Influencers convince biotech companies to prescribe their products. Companies use indirect and direct channels to reach influencers and build their brand.

Direct Channels – Companies use force to explain the benefits of products, invite influential people to promotional meetings, and advertise their products in medical journals.

Indirect Channels To engage with influencers or a targeted patient population, Biotech companies employ indirect channels. Biotech companies use a variety of channels to reach their target audience. These include sponsorships for Continue Medical Education (CME), and assistance to advocacy groups.

Amgen uses both indirect and direct channels to influence prescribers (Doctors).

New medicines can be prescribed to patients who are already taking them.

Patients should be aware of their conditions to become new patients.

Providers should be encouraged to suggest new indications for current medications.

These products are sold primarily to pharmacies, retailers, hospitals, and government agencies. The following diagram shows how Amgen generates revenues in the biotechnology product business.

Amgen’s Revenue model

Amgen sells Biotechnology products through pharmacies, retailers, hospitals, and government agencies. The company works with regional business partners, licensing partners, and other stakeholders to sell its products worldwide.

Amgen Revenues By Business Segment FY’15

Amgen’s total revenues for FY 2015 (fiscal year ending December 31, 2015) were $21.7 billion. Amgen generated $21.7 billion of these total revenues.

$20.9 billion in revenues, or 96.7%, came from Biotechnology products

Revenues of $0.7 billion, 3.3% from Royalty, contracts, and other revenues

Amgen Profits And Profit Margins FY’15

Out of the total revenue of $21.7 billion Amgen made in FY’15 for its products, $4.2 billion was the cost of goods sold. This led to a gross profit of $17.4 Billion and an 80.5% gross margin. Amgen had $9.0 billion in other operating expenses. These expenses include marketing and administrative expenses as well as research and development (R&D). The operating profit was $8.5 billion, and the operating margin was 39.1%. Amgen’s net profit after interest, other non-operating income, expenses, and income taxes was $6.9 Billion and a net margin of 32.0%.