swot analysis

Amgen Inc.: Planning the Unplannable Chance favors only the prepared mind. -Louis Pasteur Plans are nothing. Planning is everything. -Dwight D. Eisenhower Introduction With its sprawling office complex perched on a hillside north of Los Angeles in Thousand Oaks, California, Amgen was hardly a typical company. Since the day in 1983 when Amgen researcher Fu-Kuen Lin had discovered how to clone the gene responsible for manufacturing erythropoietin (later trademarked Epogen "), Amgen-founded in 1980 as Applied Molecular Genetics-had gone from a fledgling biotechnology start-up to a full-scale pharmaceutical company, with over $600 million in projected revenues and over 1400 employees. (Estimates varied, as the company was growing too fast for anyone to be sure of their figures.) The company now employed over 300 scientists, and new marketing and sales staff joined the company rosters every day. A second important drug, NeupogenTM, had been recently launched, and there were already plans for additional product launches some years down the road. For nearly a decade, Amgen's top executives had considered long-range planning an important factor in the company's success. At the same time, however, cynics might have said that luck had as much to do with Amgen's success as any planning process: the biotech business was an inherently dicey game, and predicting developments even a year into the future could often seem a mere psychological comfort. Among many people in the company, the feeling was that planning was somehow inimical to scientific creativity, and that attempts to manage and plan Amgen's future could only prove ineffectual or even damaging. While top management was aware of the difficulties the company faced, they nevertheless felt Amgen's planning process to be the very backbone of the company. With Amgen sales expected to hit $1 billion within a few years, the Amgen planning process would be put to the test.Exhibit la Amgen Selected Financial Information (in thousands except per share amounts) Consolidated Statement of Operations Data Years Ended March 31 1981 1990 1989 1988 1987 Revenues: Product sales $361,451 $152,227 $ 2,758 $ 2,130 $ 1,530 Corporate partner revenue 19,814 38, 156 67,441 42,150 28.261 Total revenues 381,245 190,383 70.198 44,280 29,841 Expenses: Research and development" 84,791 62,526 51,498 39,216 24,450 Selling, general, and administrative 117,715 72,070 23,000 10,284 6,782 Net income (loss] 34,339 19.119 (8,161) 1,725 1.137 Net income (loss] per share: Primary 78 .56 [.25] .05 .04 Fully diluted 73 .54 "Excludes $54.7 million of royalty obligation buyouts in fiscal 1981 Consolidated Balance Sheet Data At March 31 1991 0661 1989 1988 1987 Working capital $223,709 $126,994 $ 82,701 $106,173 $59,390 Total assets 514,026 308,052 207,085 192,835 96.809 Long-term debt 12,817 84.744 30,119 16,503 7.100 Stockholders' equity 398,015 189 104 161,908 163 544 83,859 Exhibit 1b Amgen Chronology 1980 Amgen founded; George Rathmann joins as CEO in October February 1981 Private equity placement of $19 million Late 1981 Erythropoietin (Epo) project team formed, headed by Fu-Kuen Lin June 1983 Initial Public Offering of $40 million October 1983 Fu-Kuen Lin clones human gene for erythropoietin April 1984 Argen initiates joint venture with Kirin Brewery Co. Lid of Japan to develop Epo November 1984 Epo Product Development Team (PDT) formed September 1985 Epo IND (Investigational Now Drug) application filed with FDA 1986 Second public offering of $38 million October 1986 G-CSF IND filed with FDA 1987 Third public offering of $75 million October 1987 EpogenTH Product License Application (PLA) filed with FDA January 1988 Stem Cell Factor (SCF) Project Team formed October 1988 Gordon Binder becomes CEO (Rathmann remains Chairman of the Board until July 1890) June 1989 FDA approves Epogen for use in dialysis patients December 1989 G-CSF PLA filed June 1980 SOF PDT formed September 1980 Amgen invests $26 million in R&D deal with Regeneron, a start-up neurobiological company February 1991 FDA approves G-CSF (Noupogen) for use in chemotherapy patients October 1991 SCF IND filedA 1 1492-052 do Exhibit 2 Drug Development Process in Biotechnology ; in Preclinical Phase III: BZ Phase I Phase 41 Approval Testing Clinical'sGod Clinicals Clinicals Total- 8-10 YEARS Post-marketing Test Laboratory and 20-60 Healthy 100-300 Patient 500-3000 Patient Volunteers Volunteer's Volunteers Safety monitoring Population Animal Studies Large-scale Assess safety, Determine Evaluate Verify Review Manufacturing and : biological Safety jand gio efficacy: Isefficacy! ! ar Process KE activity. Look for side _ Monitor adverse Distribution Dosage - effects. reactions from long-term use. Education P.E. Status at Amgen: bump Project Team Product Dev. Team AU HO Counts: Amgen THE THOR RED ETHNOREE HIMORICED AUTHORIZED COPY THORIFED SAPPYW DE ZER COPY492-052 -12- Exhibit 3 Amgen Senior Management as of October 22, 1991 Gordon N. Dimer Chief Executive Offfear and Cha iran Kirby Alton Them F. Fuch lavlc Lowell Sagra Vice President Tice President Chief Financial Officer Arthur Stacbile Dandal Vapack Senior Vice President Therapeutic Product Development Birun Resources and Tice President, Finance General Counsel Searge Horstyn Vice President Larry Har Score Ddre Bruce Altrock Chief Accounting Officer Vice President Vice President CHImica1/Medical Affairs and Corporate Controller Intellectual Property Biology, MoChe Larry SOUN Vice President Exploratory Research 180 Robert Andren Aart Browser Piel Creamy Cann Is Faston' Dury | Hill Vice President Tice President Vice President Tice President Vice President Manufacturing and Engineering EUNICE Harbutiing and Sales Process Development Facilities Quality Assurance and Manufacturing Services "Open invitation to Operating Committee meetings492-052 -13- ibli 4 Amgen Research Organization (as of June 1991) Arsearch Biology and Foleg ler and Bochemistry Cellular Biology (Bruce Altrock] (Larry Souza) 1muno log Yeast Tector Experimental Medical Pharmaceutics Handles Boulder Mavis lapoint Folocalar Biology Microbialan Science Ansearch (Bruce Altrock (Larry Souza] Stem Cell Blokk Developmental Bielon Diagnostic Experimenta Follecular Blology Pathology Prati Engineering Lab An in Research Projects Chantstry Protein Chemistry Propio Structure492-052 -14- Exhibit 5 Amgen Projected Total Revenues in Successive Long Range Plans (Numbers in grid show projected revenue (fm) for each year featured in a given plan.) 86 87 91 92 5/82 Long Range Plan 10.6 17.5 19.0 58.5 133.5 198.5 1/34 Five-Year Plan 3.0 16.5 65.3 136 Five-Year Plan 18.7 35. 33.1 27.8 0/85 Five-Year Plan 21.8 32 3 29 988 LAP (1/87) 62.0 50.1 111.0 177.0 281.0 989 LAP (1/88) 41.0 70.8 144.0 283.2 433.1 608. 1980 LAP (1/89) 84.2 94. 338.8 552.5 722.8 842.1 901 LAP (1/90) 175.5 239,1 365.2 482 0 651.8 833.4 "ACTUAL" 21.1 29.8 44.3 70.2 190.4 381.2 Join: Fiscal Year ends March 31492-052 -16- Exhibit6 Amgen Projected Epogen] Sales in Soonssive Long Range Plans (in $millions) 86 95 95 5/82 Long Range Plan I I 9.0 23.0 37. 95,1 156.0 1 1 1/84 Five-Year Plan 5.0 1/85 Five Year Plan I 10/85 Five-Year Plan 10 0 371 1983 LAP (1/87) 1021 112.3 1969 LAP (1/08] 10.5 75.0 121 5 132.0 132 0 1950 LAP (1/09) 12.5 134.9 190.2 201.3 224.0 243.B 1991 LAP (1/90) 130.9 165.2 168.4 173.B 200.3 227.7 "ACTUAL' 148.5 304.2 Note: Fiscal Your ends March 31492-052 -16- Exhibit 7 Amgen Projected Headcount in Successive Long Range Plans (average number of employees) HE 5/62 Long Range Plan 100 120 170 240 300 330 1/84 Five- Year Plan 165 225 250 1/85 Five-Year Plan 160 188 108 203 10/85 Five-Year Plan 200 215 250 1986 LAP (1/87) 228 320 385 545 682 1989 LRP (1/88) 366 956 1080 1251 1990 LRP (1/89) 45 714 1054 1381 1642 1854 1991 LAP (1/90) 632 921 1289 1583 1776 1968 *ACTUAL* 82 117 159 190 230 309 445 829 950 Note: Fiscal Year ends March 31Exhibit 8a Consensus interferon Proceed toward IND filing Cooperate with Upjohn on investigation of economic potential Commence work on limited R&D partnership for either it or IL-2 Proceed toward production of clinical quantities at suitable purity IL-2 - Proceed toward IND filing Cooperate with Upjohn on investigation of economic potential Commence work on R&D limited partnership for either it or consensus interferon Proceed toward production of clinical quantities at suitable purity Gamma interferon Continue technical effort on purification Open discussions with Genentech Hepatitis vaccine File IND Clinicals at minimal cost Attempt to license EPO - Proceed toward production of clinical quantities at acceptable purity Commence work on limited RUD partnership Continue technical effort Therapeutic Diagnostic Animal vaccines Continue low level product development effort Seek corporate partner for all animal vaccines Add and delete products as necessary to maintain approximately six products in this category. Exhibit 8b 1988 LRP Objectives (drafted 1/87) 1. Remain profitable in fiscal 1989 and minimize losses in fiscal 1989, while retaining bulk of long term return from Epo and G-CSF for Amgen. Regain profitability in fiscal 1990 and achieve earnings per share of $1.00 and $2.00 in fiscal 1891 and 1992 respectively. 2 Maintain reasonable safety net of liquid assets, through debt and equity financing. Have Epo plant operational by the end of fiscal 1988 and licensed by FDA before the end of fiscal 1989. Ensure that other manufacturing needs are met cost effectively. 4 Achieve substantial commercial therapeutic sales of Epo in fiscal 1990. Have two other proprietary human therapeutics manufactured by Amgen, and sold through Amgen sales force in the U.S. and Europe by the end of fiscal 1992. Have two new human therapeutic products in clinical trials by fiscal 1989 and three more by the end of fiscal 1982. Begin proprietary diagnostic product sales by the and of fiscal 1988 and achieve diagnostic product sales of $20mm during fiscal 1982 Initiate sale of major animal therapeutic product through corporate partner by the end of fiscal 1991.492-032 Amgen Inc.: Planning the Unplannable Exhibit 9 Amgen Mission Statement and Goals (1990) Mission Statement: To become the premier fully integrated multinational, pharmaceutical company based on the medical application of cellular and molecular biology. Goals: Provide patients with unique, high quality human therapeutics that meet important health care needs. 2 Set the standard of industry excellence in research, proprietary product development, manufacturing and customer service. 3. Maintain a supportive environment where employees are challenged, motivated and encouraged to achieve their maximum potential. 4. Achieve substantial long-term rewards for shareholders, striking a balance between earnings and investment in the future. Source: Amgen 1891 LAPIndustry and Company Background The term biotechnology referred to a hybrid field that used new techniques to produce products quite different from those of a traditional pharmaceutical company. While traditional pharmaceutical companies sold organic chemical products produced by chemical processes, the emergence of biotechnology allowed protein-based pharmaceuticals to be produced by living cells through fundamental biological processes. Central to this new method was the 1970s development of recombinant DNA technology, which allowed scientists to manipulate genetic material in cell nuclei in order to control the production of otherwise "unmanufacturable" biological agents. Amgen had not been the first company to enter the biotechnology arena. Genentech, which had been the largest and most successful biotech company until financial problems forced its recent sale to Hoffman-LaRoche, had been the original pioneer when it was founded in 1977. Other companies, such as Cetus and the Cambridge, Mass.-based Biogen, had been founded soon thereafter. Amgen, founded in 1980, however, now stood alone as the only independent company with its own manufacturing, marketing, and sales functions. (For Amgen financial data and a chronology of the company, see Exhibit 1.) If the biotechnology industry depended upon the scientific advances of the 1970s, it just as heavily depended upon another kind of innovation: the availability of venture capital. Even more so than other high-tech industries, biotechnology required enormous initial investments that could only be covered by venture capitalists willing to take on significant risks. In 1960, Amgen was founded by a group of researchers and venture capitalists, and George Rathmann-formerly of 3M and Abbott Laboratories-became the Chief Executive Officer. The company was formallly launched in 1981 with an initial private funding of $19 million, the largest initial equity financing of a biotechnology company to date. By the end of its first year of operation, Amgen had nearly 60 employees-almost all of them scientific researchers. At this early stage, there was no clear notion of what Amgen would sell, or of when it would be able to sell it. The Amgen prospectus had listed several different segments of inquiry that might prove commercializable-human therapeutics, animal hormones, chemicals, and diagnostics-but it was impossible to tell exactly what would pan out. In any case, it was understood that financial success would almost certainly be several years off-especially if the firm was to enter the arena for therapeutic products-as the patenting, testing, and commercial licensing of new molecules were all highly uncertain. Even when successful, the path to commercial release of a new product could take up to ten years. (Exhibit 2 shows the general drug development process for biotechnology products.) Success and Transformation Epogen The May 1982 long-range plan showed a portfolio of more than ten major projects being worked on concurrently by Amgen researchers. Erythropoietin, or Epo, was one of these, but it was perhaps the project that generated the most frustration. For decades, scientists had known that erythropoietin, a substance found normally in the human body, stimulated the manufacture of red blood cells and could be useful in the treatment of anemia. Since erythropoietin was impossible to synthesize in the laboratory, it became a natural target for the efforts of biotech companies looking to create new drugs. Epo was seen as a particularly lucrative opportunity because of the more than 100,000 kidney dialysis patients in the United States. About 75% of these could be expected to take Epo and each patient could generate up to $4000 to $8000 in sales per year.By 1983, Amgen's Fu-Kuen Lin had been working for two years to try to clone and express the gene responsible for the manufacture of Epo in the body. As time went by, other Amgen scientists, such as head of research Dan Vapnek, began to doubt whether Lin and his team weren't looking for a needle in a haystack, and some began to question whether the resources being spent on Epo might not be better spent elsewhere. After all, Amgen already had several other projects (such as interferon) that had more promising commercial potential. But there was disagreement as to whether the project should be stopped, and Lin persevered. Finally, in October 1983, a new technology gave scientists a new way of "fishing out" a gene and the Epo project thus survived another round of criticism. Soon, Fu-Kuen Lin became the first person to clone and express Epo, and suddenly the fortunes of Amgen as a company looked considerably brighter. Building the Company The discovery of the gene responsible for Epo was the turning point in Amgen's short history. Lin's discovery, however, was just the first step in a long and equally delicate process for Amgen. Isolating the gene was one thing; to turn the Epo molecule into a product to take it to "commercialization," in industry jargon-would be another. Even before Lin's success in cloning the Epo gene, Amgen had taken several steps that would later ensure Epo's viability as a product. For many years-even while the possibilities for cloning Epp looked remote-Amgen had been working to build the kind of infrastructure that would be important if a molecule like erythropoietin were to be cloned. In the words of Jeff Browne, who led the Epogen product team after 1984: The perceived role of Epogen before 1983 was that if you could clone the gene, you'd have tremendous potential. There wasn't too much you could do other than to hope that Lin did it, but there were things to do as a company to be able to position yourself better if you did succeed. For example, Amgen made the decision very early to explore mammalian cell technology [a means of implanting genes in isolated mammal cells for production purposes]; the anticipation was that if something like Epo were ever cloned, no one could say we hadn't been preparing for the downstream opportunity. Amgen also built up its infrastructure during these early years by bringing on biochemists and thinking about eventual manufacturing processes. While building an infrastructure, Argen had also been careful to maintain a large cushion of cash secured by several rounds of capital raising, totalling over $300 million during the course of the 1980s. With an infrastructure in place, Amgen realized it had to work quickly to expedite the awarding of a patent and, eventually, the granting of a commercial license. Even to get Epo to the level of clinical testing would take much more research into expression systems (such as mammalian cells), purification systems, and manufacturing systems. By 1984, Lin's project team associated with Epo evolved into a "product development team," or PDT, with members (still technically all research scientists) who would later become part of areas such as clinical testing and manufacturing. In the fall of 1984, Jeff Browne replaced Fu-Kuen as head of the team, as the expanding scope of the PDT required managerial as well as scientific skills. ("Fu-Kuen is a great scientist," was the common explanation, "but a poor manager of human beings.") Final FDA approval for Epogen's use in dialysis patients came in 1989. (Amgen licensed its non-dialysis rights to Ortho Pharmaceuticals on a royalty basis in 1985.) PDTs In 1991 By 1991, within two years of its introduction, Epogen had sales of several hundred million dollars per year, and Amgen had more than ten times as many employees as it did when the Epo PDTwas established. Epogen was also no longer the sole PDT. During the second half of the 1960s, Amgen, now focusing exclusively on human therapeutics, gave formal status to several other POTs involved with molecules that showed a high degree of commercial potential. One such PDI, for the molecule G-CSF, had already brought its molecule to commercialization, under the trademark name of Neupogen. (G-CSF, or granulyte colony stimulating factor, promoted the production of a certain kind of white blood cell helpful in preventing and treating infection and was approved for initial use in chemotherapy patients.) Neupogen was expected to be an even larger success than Epogen, especially since there were many other indications aside from chemotherapy for which it could potentially find approval. In addition to Epogen and Neupogen, there existed approximately four other PDTs, all at varying levels of carly development In 1991, the typical PDT had representatives from most of Argen's functional areas, with the relative distribution of people depending upon the team's particular stage of development. Manufacturing, clinical testing, quality control, logistics-all had been spun out of research to become distinct areas of the company. Likewise, a formal sales and marketing function had been developed (almost entirely in the past three years), and it too had become a significant input to the PDT process. Jeff Browne, who still led the Epo team, put the total number of formal team members on his team at 22, although some members were more involved than others. The Epp FDI met once every three weeks for a two hour meeting. Browne described the duties of the PDT in the following manner: The product team is involved in new developments, as opposed to the day-to-day things that go on in the functional departments. The PDT exists to think ahead and solve problems; it's the place where people are sitting down together to discuss the issues. PDTs kept annual budgets as well as five-year plans, the details of which were fed upward into Amgen's overall long-range planning process. Stem Cell Factor (SCF) Aside from Epogen and Neupogen, which both had "mature" PDTs, the biggest project at Amgen in 1991 was an exciting new molecule known as SCF, or Stem Cell Factor. SCF was a complex molecule responsible for triggering the production of marrow cells involved in the earliest stages of blood cell production. Amgen researcher Kris Zsebo, who had earlier been involved with G-CSF, had done much of the pioneering work on SCF, and now led a recently-chartered PDT seeking to bring the molecule to commercialization. In the words of one vice president, Zsebo was "working to set up a mini-company within a company." Intelligent and candid-with a reputation for stubborn persistence-Zsebo, a 1983 Ph.D. in biochemistry, sought to shepherd SCF from research, through clinicals, and on to commercial release. SCF was the most likely prospect for Amgen's next major drug, although probably not until 1995. Zsebo estimated that nearly 75 people were currently involved in some way with the work on the new molecule. (Exhibit 3 gives a 1991 organization chart for Amgen's senior management.) Research at Amgen Scientific research at Amgen had two basic functions: first, to support the development of molecules already targeted as likely products, and second, to do exploratory work into new molecules and new possibilities for biotechnology in general. The first was roughly aligned with the functioning of Amgen's PDTs. The second was much more elusive and vaguely defined, yet just as important.In charge of Amgen's research function was Senior Vice President Dan Vapnek. Vapnek was himself a Ph.D. and scientist who had come to Amgen in 1981 after academic stints at Yale University and the University of Georgia. With Amgen having become a powerful company in so short a time, Vapnek confessed that he often felt confused as to whether he was a manager or a scientist. Vapnek's confusion, however, was representative of all corporate research in biotechnology. On the boundary between business and academia, the normal rules of management seemed no longer to apply. As Vapnek put it: "It's impossible to manage Ph.D.'s." Basic Control The research function in Thousand Oaks was divided into approximately sixteen different labs, each with between five and fifteen scientists. (See Exhibit 4 for a organization chart of the function.) Each lab had a head scientist who either reported to one of two research VPs or to Vapnek himself. Yet despite the neat structure on paper, the notion of "managing science" was considered something of an oxymoron by many at Amgen, Vapnek not least of all. As Kris Zsebo, the above- mentioned PDT leader for SCF, noted: You can't tell a scientist to do something because of strategic, authoritative reasons and then expect that person to do what you tell them. Scientists just don't work that way. While there were certain scientists-such as Fu-Kuen and /sebo herself-who had garnered reputations for being especially uncompromising about how they pursued their work, nearly all researchers considered themselves professionals whose duty to science often came before their willingness to acquiesce to managerial demands. Most researchers defined their identity not just in terms of the company structure, but in relation to an international network of scientists that spanned universities, institutes, and other companies. Traditional logic about reporting relationships and the delegation of authority didn't always apply- Mike Narrachi, head of the Neupogon PDT, echoed the feelings of many when he said that good science resulted not from strict managerial control, but from a certain absence of control, from a willingness to submit to chaos: Research is super-creative, so you have to let chaos run rampant; it's the most persistent, aggressive, and gifted people who make it to the top. The research function consisted of a constantly shifting network of projects and allegiances that formed, prospered, and faded with little direct intervention from above. A project that looked promising would attract scientists from the same or other labs, while a project that seemed to be failing (such as Lin's Epo project before the discovery) would be spumed. In the words of Jeff Browne: The mechanisms of shepherding researchers are mostly informal. What generally happens is that when a new project comes along, people get drawn away from what they're doing to join the new thing that looks promising. Basically, scientists vote with their feet about what's new and interesting. Structuring Chaos While it was difficult and perhaps inadvisable to closely control the work that researchers ild, there were several mechanisms in place to insure a certain amount of formal structure and control in the research labs. Exploratory projects could be initiated by securing approval from anyone of the top three research-related senior executives: Dan Vapnek, Larry Souza, and Bruce Altrock-even if the other two did not like the project. Official projects with large resource requirements required authorization from senior management both in regard to budgets and headcount, and researchers in turn allocated their time in accordance with project team leaders and lab supervisors. Despite this, however, it was generally accepted that up to twenty percent of scientists' time was their own, free to spend on any projects they desired. Zsebo used the term "bootleg research" to refer to that certain portion of a researcher's work that was done without officially allocated resources, achieved through a network of friends and contacts both inside and outside Amgen. For the most part, project teams never truly formally died. While product development teams might be discontinued (as had recently occurred with a molecule called EGF, or epidermal growth factor), a certain level of lab work was maintained even on those projects that had ceased to look very promising. Mike Narrachi explained: Nothing gets killed at Amgen. Things just kind of reduce. I've never seen a project get killed, just the heat turned way down. You never know when you're going to want to resurrect something, which could be infinitely more consuming than shutting it down. Compensation Senior management believed that traditional thinking about incentives didn't hold for research scientists. While stock options and salaries were seen as important-almost every single Amgen employee held stock options, in fact-top management felt that financial incentives mattered little to people whose self-definition rested upon the quality of their work and the respect of their peers. CEO Gordon Binder joked: If you hung up ten million dollars in a big balloon in the lobby of one of our buildings and said "Whoever discovers the next big new product gets the money," I don't think you'd get a new product any faster, or get people to change what they were doing or work harder. Long-Range Planning To Binder-who had succeeded George Rathman as CEO in 1988 after serving as Chief Financial Officer since 1982-Amgen's commitment to long-range planning separated it from other companies. "Argen really believes in planning to an extent that's unique," he claimed. To a certain degree, Amgen's emphasis on planning was a by product of the company's history: venture capitalists demanded extensive business plans before they were willing to invest, and Amgen had quickly learned that, in a quite literal way, planning paid off. Binder commented: When you raise venture capital, you always need a plan. Every year you update it- it never stops. The first year, the CEO just sat down and wrote it, and we've gone on refining the process since then. In the beginning, producing detailed long-range plans (LRPs) was an important way Amgen could signify its worthiness to investors. Amgen's 1982-63 plan carried the following explanation regarding the accuracy of the projections it contained: All the critical elements of the business plan including timing, probabilities of success, the availability of financing, collaboration and partnerships, facilitiesrequirements, and staffing opportunities have significant uncertainties. Information is being acquired at a rapid pace and changes in planning must occur over time Nevertheless, a definitive business plan must be generated so that the organization moves in a uniform direction and investors and potential investors will have an understanding of what management believes to be the most probable course for the corporation at any point in time. Despite the difficulties inherent in such planning, especially during the company's early years, most senior executives felt that the long-range projections had been surprisingly accurate. (See Exhibit 5, 6, and 7 for comparisons of the projections in Amgen's LRP's with actual figures.) Plan Structure As Amgen had changed, so too had the format and contents of the LRPs. Many executives at Amgen observed that the plans had initially been largely quantitative, but had shifted to being more qualitative as financing issues were eclipsed by the nuances of managing two blockbuster products. Early plans, especially those dating between 1983 and 1986, tended to be almost strictly financial, with many pages of projections regarding product revenues, spending, and headcount levels. (See Exhibit 8 for excerpts from the qualitative portions of two plans.) By 1987, with the commercial release of Epogen looking more and more inevitable, Amgen's LRPs began to include more "soft" features aside from the obligatory financial charts, From this time on, Amgen began its long-range plans with a page dedicated to its mission statement and corporate goals (see Exhibit 9), and followed it with a detailed statement of the company's major issues, objectives, and assumptions. The plan listed explicit assumptions in regard to matters such as product launch dates, market share, financing, operations, and the competitive environment. Objectives listed were generally non-specific and almost entirely non-quantitative. For example, one objective on the 1988 plan (approved January 1987) was simply to "have two other proprietary human therapeutics manufactured by Amgen, and sold through an Amgen sales force in the U.S, and Europe by the end of fiscal 1992." The sophistication of the financial projections grew at the same time, with the result that the complete plan often totalled about 30 pages. Planning Process For the first several years of the company's existence, the long-range plan was simply produced by senior management. Since 1986, however, the means of producing long-range plans had undergone many changes. Lowell Sears, who had replaced Binder as CFO, had come to Amgen as Treasurer in 1986 and had immediately set to work to modify the way planning was handled in the rapidly-growing company. He recalled: When I got here in 1986, the planning was very much top-down. I got involved in trying to make it more interactive and more bottom-up. For the first two years, my greatest challenge was just to get the people at all levels of the company to buy in to the process of planning. Sears had begun meeting with the heads of the various product teams (which kept their own five- year plans for product development) to get a sense of their time frames and resource needs. In 1988, Sears hired Marker Wiegand-an MBA with five years of business experience-as manager of strategic planning, who then further formalized and institutionalized the planning process. At present, the planning process was organized around a two-day offsite meeting that involved Amgen's top sixteen officers. Before this meeting, Sears explained, a top-down view of theplan was disseminated to about fifty people within the company for comment, and the feedback from these people was used to arrive at a revised version. At the December off-site, the officers drafted a final version of the plan which was then put up before the Board of Directors in January, who normally approved the plan after discussion but with few difficulties. The planning process had evolved throughout Amgen's history, and such evolution was expected to continue. According to Paul Dawson, Vice President of Marketing: We seem to change the planning process every year. The process gets bigger every year, and we never believe that we've found Nirvana: planning is never allowed to settle into a steady state at all. Plan Use Long range plans were disseminated to employees at the vice president level and above, to PDT leaders, and to selected members of staff. According to Binder, long-range plans were the documents that guided company actions for the coming year. He said: Our plan is a document of action and not just an estimate of future revenues and so forth. When we make a plan, it's with the idea that these are things we're actually going to do. We really reinforce the idea that this plan is an action plan. Nevertheless, Jeff Browne's sentiments echoed those of many who were just below the level of top management I can't say that I really explicitly use the finished plans, but the process of coming up with a finished plan is useful. It forces you to sit down and clarify what it is you want to do over the next five years. At least for me, though, once I go through that exercise, it just goes into the file drawer and I don't really make much use of it after that. What I might do is go back to it the following year and ask myself "OK, how has the world changed from what we said we were going to do?" In that way, the old plan can become useful in coming up with new budgets and new plans. Paradoxes While it was clear that senior management viewed long-range planning as the backbone of the company, it was less clear what role the plans played on a day-to-day basis at Amgen. Certainly, there was a sense in which careful planning could be seen as the tool that had allowed Argen to successfully navigate the hazards that faced such a young, explosively-growing company. From another perspective, however, the reality behind the LRP's was unclear. Even from top management, there was the admission that the major scientific advances on which Amgen was based had occurred almost entirely apart from the planning process, Gordon Binder noted that "when you look back, about half of our important projects were things that a lot of people wanted to discontinue." The researchers themselves often felt strongly that Amgen's formal management systems often functioned to hinder, rather than to encourage, the work that had led to the company's success. Fu-Kuen Lin, for example, believed that Epo had almost died due to lack of management support. Addressing this problem, he stated:If a researcher has confidence, the management should stick with the project. The Epo project would have died in someone else's hands, because they wouldn't have been able to handle the discouragement. He continued: To do Epo, I almost had to defy management. And because discouragement travels downward in an organization, many scientists didn't want to touch the project. Others told their associates not to work on it, but fortunately there were people who stayed on. I think that for planning to be successful, every project needs to have a champion who can endure the discouragement. Kris Zsebo felt much the same way about her involvement with SCF: I truly don't think that management realizes that there's any discrepancy. For instance, they'll use examples like SCF to show that the company works so smoothly. But there's probably not another person at Amgen who could have put up with what I had to put up with to get the program this far. I practically had to be made out of steel. Thus, Zsebo-like Jeff Browne-felt that while planning might in some ways be quite important, especially for upper management, it didn't really yield that much useful knowledge. She mused: A lot of what happens at Amgen is driven by results. You can have a plan that says you're going to do X, Y, and Z, but in the end, you get data from clinicals, or data from marketing, and that's your reality. No amount of planning is going to change that. You can plan for various research events, clinical events, or marketing events, but you're just not there until you're there. She continued: What's most clear is that you can't plan for a discovery; it has to happen, and it's not always clear how, Sometimes, it may be a number of years until something new comes along, and whatever's in the LRP isn't really going to make any difference. To a degree, such a view was evident in Vapnek himself. Looking out his window over the hills of Southern California, he reflected on the fascination with long-range planning that defined Amgen and to which it was tempting to attribute the company's success. With good-natured cynicism, he admitted: "I happen not to be a planner. Planning for me is a painful process, so I tend not to be too enthusiastic about planning." In Vapnek's view, good science was what was important. If Amgen could do good science with an eye to good products, that counted more than all the long-range plans, mission statements, and credos in the world. As far as he was concerned, the mission of Amgen research was simple: "to develop human therapeutics that sell themselves." Why did the company need to be so complicated, he wondered, and what, if anything, was the real value of so much planning