Businessmodel of Amgen

Customer Segments

Amgen’s products are designed to serve customers across all parts of the medical and healthcare sector. The majority of the Company’s sales are made to wholesalers and distributors, which in turn sell the Company’s products to their customers, which include physicians, clinics, dialysis centres, hospitals and pharmacies. In 2015 the Company’s product sales to leading medical wholesalers AmerisourceBergen Corporation, McKesson Corporation and Cardinal Health, each accounted for more than 10% of Amgen’s total revenues for the year.

Amgen’s principal market is its native US, which accounted for almost 80% of the Company’s product sales in 2015. The Company, however, serves customers worldwide, with its remaining sales targeting customers across the rest of North America, Latin America, Europe, the Middle East and Asia.

Value Propositions

Amgen provides value to its customers in the following ways:

• Its portfolio of quality and original products, with the Company providing a broad range of therapeutic products targeting a range of conditions and ailments, with a track record of being safe and reliable;
• Its global sales reach, with the Company serving a broad spectrum of customers worldwide, including across the Americas, Europe, the Middle East, and Africa;
• Its efficient and reliable manufacturing operations, with the Company providing safe and reliable production of biologic medicines;
• Its commitment to innovation and development, with the Company devoting a substantial portion of its revenue to research and development activities, with a view to creating new and innovative products; and
• The expertise of its personnel, with the Company employing well-trained technical staff and experienced industry executives. ### Channels

Amgen operates a website at www.amgen.com, through which it provides information on its products, services, and corporate activities. The Company does not, however, operate an online sales channel.

Amgen sells its products to wholesalers and distributors through its own in-house direct sales force. The largest concentration of the Company’s sales and marketing forces are based in the US and Europe, with the Company expanding its marketing presence across parts of Latin America, the Middle East and Asia. Outside of the US the Company frequently makes sales by establishing affiliate companies, acquiring existing third party businesses or product rights, or in partnering with third parties.

Amgen’s products reach the general public through a network of pharmacies, medical centres, hospitals, and clinics.

Customer Relationships

While Amgen has an online presence, the Company does not operate an online sales channel. Instead, the Company’s in-house sales organisations deal directly with customers, consulting with them over a period of time in order to fully cover the needs of the customer. Amgen seeks to establish long-term relationships with its customers, often agreeing multi-year sales contracts with its largest customers.

Amgen provides support and assistance to existing and potential clients, who are able to contact the Company over the phone and by email, receiving personalised responses to all queries, enquiries, and concerns. This is supplemented by online support resources, such as medical information, safety data sheets, and product information.

Customers are also able to interact with Amgen directly through its social media profiles, including with YouTube, LinkedIn, and Twitter. The Company also publishes news releases and statements on its website to keep customers informed on corporate developments.

Key Activities

Amgen is a biotechnology company. The Company is engaged in the discovery, development, manufacture and delivery of various human therapeutics products. The Company’s activities are organised into a single operating segment concerning its human therapeutics business.

The Company provides a number of products targeted at a range of ailments and conditions, including Neulasta, Aranesp, EPOGEN, Sensipar/Mimpara, XGEVA, Prolia, and NEUPOGEN. Amgen is also engaged in research and development activities, seeking to produce innovative treatments for serious illnesses in the areas of oncology, haematology, cardiovascular disease, inflammation, bone health, nephrology and neuroscience.

Its products in Phase III programs include Aranesp for Myelodysplastic syndromes, ENBREL for Psoriatic arthritis and Rheumatoid arthritis remission, IMLYGIC for Metastatic melanoma, and Kyprolis for Multiple myeloma.

Key Partners

Amgen collaborates with various companies throughout the process of developing, manufacturing and distributing its products. These partnerships can be placed into the following core categories:

• Academic and Research Partners, comprising academic institutions, research organisations, and pharmaceutical and therapeutics companies that assist the Company in developing new and innovative products;
• Supplier Partners, comprising suppliers of tools, resources, technology, and services that assist in the development and manufacture of the Company’s products;
• Business Development Partners, comprising a range of alliance and strategic partners with which the Company shares resources and collaborates on joint-venture projects; and
• Channel Partners, comprising distributors, affiliates and sales agents that help to extend the Company’s sales and marketing reach in jurisdictions where it is not well-represented. Amgen has development partnerships with other pharmaceutical companies such as Daiichi Sankyo, Novartis, and Takeda.

Key Resources

Amgen’s key resources are its intellectual properties and licensed technologies, its manufacturing and production infrastructure, its sales and distribution channels, its partnerships, and its personnel.

Amgen has a number of patents and trademarks in place in the US and internationally in order to protect its intellectual properties. Searches of the records published by the US Patent and Trademark Office identified numerous patent applications filed in Amgen’s name, including applications entitled ‘Heteroaryloxyheterocyclyl compounds as PDE10 inhibitors’, ‘Processes of making and crystalline forms of a MDM2 inhibitor’ and ‘Methods for modulating mannose content of recombinant proteins’.

Cost Structure

Amgen incurs costs in relation to the development of new products, the operation of its manufacturing and logistics infrastructure, the management of its partnership, the operation of its sales and marketing channels, and the retention of its personnel.

In 2015 Amgen accrued research and development costs in the amount of $4.07 billion, with cost of sales expenses amounting to $4.22 billion. The Company also accrues similar selling, general and administrative expenses – including the payment of salaries and benefits to its workforce of more than 17,000 employees – which totalled $4.85 billion in 2015.

Revenue Streams

Amgen generates revenue through the sale of its various therapeutic products to customers operating within the medical and healthcare sector. The Company also derives a small amount of revenue from royalty income and corporate partner revenues, which are recorded under the Other Revenue category.

In 2015 Amgen recorded annual revenue of $21,66 billion, up slightly on the $20.06 billion generated by the Company in 2014. The vast majority of this revenue, $20.94 billion, was generated through product sales. Close to 50% of the Company’s product sales revenue was derived from the sale of ENBREL and Neulasta, which respectively recorded annual sales of $5.36 billion and $4.72 billion.