When massive acquisitions take place, job cuts typically follow. Such is the case with Amgen (NASDAQ:AMGN) today. The company announced it will lay off 350 U.S. employees from Horizon Therapeutics. Notably, AMGN stock moved 1% higher on the news.
Horizon’s massive $27.8 billion acquisition of Horizon is one of the biggest in the pharma industry in recent history, and indicates a resurgence of interest in terms of mergers and acquisitions (M&A) in this space. Various drug companies are looking to consolidate the sector to revive their cash-flow growth prospects, as drug cliffs and other factors impact longer-term growth projections. Amgen is one of a number of mega-cap pharmaceutical players engaging in this strategy right now.
The 350 U.S. jobs that will be offloaded appear to be mostly duplicative. This will allow Amgen to make good on at least a portion of its synergy targets for investors. As the company looks to streamline its operations further, investors appear to be pricing in some valuation expansion.
Let’s dive into what investors should make of this move today.
AMGN Stock Moves Higher on Layoff Announcement
According to recent reports, Amgen is looking to retain roughly 80% of Horizon’s U.S. workforce. The company appears able to absorb due to its existing U.S. workforce and expertise.
Amgen noted in its remarks that Horizon’s knowledgeable and skilled workforce will be relied on for the company to “continue serving patients suffering from rare diseases.” As the integration continues, we may see additional layoffs announced. But given the company’s stated intention to retain roughly 80% of Horizon’s employees, this round of cuts should be about it.
Notably, Amgen has provided ample notice to the employees it’s looking to lay off. Reportedly, no jobs will be terminated before the end of the year. The company appears to be taking a very respectful and considerate position when it comes to these layoffs, softening the blow for affected workers.
It’s never a great thing to see headlines of more job cuts. And we seem to be seeing more such headlines lately. That said, investors in AMGN stock appear to like the cost-control focus of the company’s management team and are buying into this news.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
