|Lundbeck CEO Kåre Schultz|
Lundbeck is going on a cost-cutting binge. Amid falling sales--and a few months after a new CEO took the helm--the Danish drugmaker says it will cut loose 1,000 employees as part of a plan to save 3 billion kronor, or about $445 million, by 2017.
Most of the job cuts will hit headquarters in Valby, Denmark, and commercial operations, mostly in Europe. Though Lundbeck has been restructuring its commercial organization in Europe for a few years now, that hasn't been enough, the company said in a Wednesday statement.
As part of that revamp, Lundbeck will bring 5 products to the forefront: The long-acting antipsychotic Abilify Maintena, which it sells in partnership with Otsuka; the new antidepressant Brintellix, intended to pick up where blockbuster Cipralex left off; Northera, used to treat sudden drops in blood pressure related to neurological problems such as Parkinson's disease; the seizure drug Onfi; and the antipsychotic Rexulti, approved last month to treat schizophrenia and depression. Notably absent from the list is Selincro, an alcohol-addiction drug rolling out across Europe.
All headquarters functions will be restructured, the company said, and Lundbeck will expand its business services center in Krakow, Poland, to take on administrative and accounting functions. Finally, Lundbeck will shut down a selection of early-stage R&D projects.
The cuts are billed as a way for Lundbeck to gin up the cash it needs to beef up its pipeline and improve returns. "Lundbeck needs higher profitability to be able to invest in future profitable growth initiatives leading to better treatments for patients and secure a competitive return on investment," the company said.
The moves will help the company deliver operating profits by 2016 and improve that margin in 2017. And that's part of the mission handed to CEO Kåre Schultz when he joined the company from Novo Nordisk ($NVO) in May. At the time, Chairman Haakon Bjorklund said Schultz's "most important task" was to take Lundbeck into the black as soon as possible.
The task ahead is illustrated by Lundbeck's first-quarter sales of old standby Cipralex, however--at 812 million crowns, they still accounted for almost one-quarter of sales, and generic competition is bringing that number down fast.
Abilify Maintena appears to be on the right track, with first-quarter sales of 120 million kronor, three times the amount it brought in the same period last year--and up 50% quarter-over-quarter, too. Onfi, an orphan drug for a severe form of childhood depression, saw sales almost double to 390 million kronor. Rexulti is launching this month in partnership with Otsuka.
Lundbeck will spend 1.1 billion kronor on the restructuring, much of it in severance payments. The company will also write down some assets in the third quarter--by about 600 million kronor.
- read the Lundbeck release
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