Layoffs May Sow Seeds for Life Science Startups

63

When Amgen Inc. last week dismissed 226 researchers and R&D support staff, some local biotech executives, especially veterans of past Amgen cutbacks, said it could pump life into the region’s life science industry by encouraging the formation of startups.

Consider Sanjay Khare, who was scientific director of the company’s inflammation research unit but took a buy-out during the company’s last major restructuring in 2007. He went on to form ImmuneGene Inc. of Thousand Oaks, which is working on cancer treatments and employs eight people, including other Amgen alum.

“I always had entrepreneurial inclinations, but when you have a comfortable job with a paycheck every two weeks, it’s hard to make the jump. I’ve never regretted it,” said Khare, who will be seeking his first venture capital at next month’s SoCalBio Investor Conference.

Another Amgen alum, John Swither left the company in 2007 and became chief financial officer at Calabasas’ Kythera Biopharmaceuticals Inc., which had been started two years earlier by a former Amgen colleague.

“It does take a special person to decide to take a leap into becoming an entrepreneur,” Swither said. “But for those who have been willing to work hard and have an innovative new idea, it can be done.”

Amgen, founded in 1980, is among the world’s largest biotechs by market cap. With 6,200 employees at its sprawling Conejo Valley campus prior to the layoffs, the company is the region’s 20th largest private-sector employer.

For most of its history, a job at the company was like working in Detroit during the heyday of the Big Three automakers – a good salary and plenty of security. In addition, Amgen’s benefits included stock options that enabled many longtime employees to become millionaires even as they continued working in their laboratories.

That changed in 2007 when the company eliminated more than 675 local jobs – among 2,600 worldwide – in order to cut costs during a prolonged sales slump of its flagship anemia drugs.

Last week, Amgen said its latest decision to cut its work force was part of a plan to shift resources toward less risky but more expensive later-stage research. Worldwide, 380 employees – most of them involved in early stage research on potentially cutting-edge technologies – were given pink slips.

At least some of the workers may be able to find jobs at other firms. The Southern California Biomedical Council trade group currently lists more than 100 openings at biotech and medical device companies in Los Angeles, Orange and Ventura counties.

Those listings don’t include roughly 35 openings being advertised by Santa Monica cancer drug developer Agensys Inc., a startup acquired by a Japanese drug company nearly four years ago. Agensys, which plans to move into a larger 160,000-square-foot facility in 2013, has grown from less than 100 employees to more than 180 since its acquisition.

Losing talent

However, Manish Singh, a former venture capitalist who in 2006 co-founded Woodland Hills startup ImmunoCellular Therapeutics Ltd., said he doubts the area’s biotech startups can absorb hundreds of displaced workers.

He noted that like many startups these days he still only employs seven people full time because his company outsources many functions. He’s also skeptical of the prospect of dozens of startups being born from Amgen’s downsizing.

“It may not be the best time to raise money for private companies in life sciences … but if you are bullish and willing to take some risk you should give it a try,” Singh said

Ahmed Enany, executive director of the Southern California Biomedical Council that sponsors the SoCalBio Investor Conference, agreed that it’s unlikely all the employees could be picked up by established biotech firms. But he said the former employees should be top contenders for R&D openings in academia and even other industries given the type of sophisticated research positions Amgen cut.

That means some will have to go out on their own if they want to say in the area’s biotech industry. He suggested they consider banding together to launch startups.

“Amgen hasn’t been known for producing a lot of spinoffs, but that needs to change because of who is being laid off this time,” Enany said. “To lose all this research talent to other biotech hubs would be a tragedy.”