Lundbeck bags Novo exec Schultz to engineer a much-needed turnaround

Kåre Schultz

Mystery solved: Novo Nordisk ($NVO) heir apparent Kåre Schultz didn't just up and leave the Danish drugmaker. He left for the top job at crosstown colleague Lundbeck, vacant since that CEO stepped down in disgrace in November.

Lundbeck announced Schultz's appointment Wednesday along with first-quarter results, which were about as poor as analysts had expected--a $4.8 million loss before interest and taxes as sales continued to suffer from Lexapro and Cipralex generics.

The numbers underscore the challenges Schultz will face at Lundbeck, which is relying on a handful of new drugs to help offset those patent losses. As Novo's chief operating officer--and most recently, president--Schultz had to help keep the diabetes specialist on its growth track. At Lundbeck--which focuses on CNS meds--he'll be charged with reversing a decline.

"His most important task is of course to see that we return to sustainable profitability as soon as possible which means exploring all possible avenues to increase sales," Lundbeck chairman Haakon Bjorklund told Reuters.

Investors and analysts appear to be confident Schultz can do so. Lundbeck shares were up 25% on the news, thanks to his Novo halo. "I think he can turn the company around," Sydbank analyst Soren Lontoft Hansen told the news service. "Kaare Schultz's profile from his Novo days makes him a good fit for launching new products."

Schultz replaces Ulf Wiinberg, who stepped down in November after violating the company's conflict of interest policies. At the time, analysts lamented the lack of a helmsman as Lundbeck was laboring to launch its new meds.

Lundbeck is looking to pump up its newer brands Abilify Maintena, a longer-acting version of the blockbuster antipsychotic pill; Onfi, a treatment for the severe form of epilepsy known as Lennox-Gastaut syndrome; and Brintellix, a recently launched antidepressant that brought in 98 million crowns for the first quarter. Selincro, its treatment for alcoholism, is slowly gathering steam, with 41 million crowns in first-quarter sales.

The Abilify injection's sales tripled in the first quarter, to 120 million Danish crowns, Lundbeck said. That's an impressive increase of 50% quarter-over-quarter, too. But brand-new generic versions of the oral Abilify--launched just last week--could interfere with the injection's prospects in the U.S. Onfi, an FDA-designated orphan drug, is a different story; launched in January 2012, Onfi sales almost doubled in constant currency terms, to 390 million crowns.

So, Lundbeck has some products to work with. Some recent restructurings have brought down its cost base. But the Cipralex franchise still accounted for almost one-quarter of its sales, at 812 million crowns--and that was down by almost half year-over-year on generic competition in Europe and Canada. That generic erosion isn't going to stop, and nor is generic competition for another of its historically big products, Ebixa.

Schultz says he's up for the fight. Citing the "challenging times" his new employer faces, Schultz said he's "motivated and inspired by Lundbeck's vision and excited to bring my business background to lead Lundbeck to the next phase of its development."

- read the release from Lundbeck
- get more from Lundbeck (PDF)
- check out the Reuters coverage

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