Lundbeck's change in fortunes leads investors to punish Danish drugmaker

Lundbeck interim CEO Chief Executive Anders Gotzsche reported significant growth in sales for the third quarter, but the overall picture disappointed investors.

How quickly fortunes change. Last quarter, Lundbeck's then CEO Kåre Schultz got to report that the Danish drugmaker had its best first half ever. Today, Schultz is gone and investors punished Lundbeck’s shares after sales of newer meds failed to live up to some of their expectations.

Lundbeck actually reported (PDF) an operating profit that grew 140% to 1.42 billion Danish krone ($221.22 million), beating analyst expectations. And it revised its 2017 guidance upward to a range of DKK 4.3 billion to DKK 4.6 billion ($670.49 million to $717.27 million) from its previous guidance of DKK 4.1 to DKK 4.5 billion.

But that profit beat came from tight cost controls and improved sales of off-patent drugs that are just now getting hit by generics, leading Sydbank analyst Soren Lontoft to put a “hold” on the stock, Reuters reports. And the new guidance was what analysts were already expecting and wasn’t based on stronger sales, Reuters reported, citing Jyske Bank trader Martin Munk.

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In North America, where Lundbeck generates about 65% of its sales, revenue grew 19% but interim Chief Executive Anders Gotzsche acknowledged to investors that generics of products like Huntington’s drug Xenazine, which saw U.S. sales fall 24%, will limit growth going forward.

Investors were primed for disappointment after Schultz, who masterminded the company’s two-year turnaround, left in September to take the CEO spot at an even more troubled company, Teva.

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Schultz was lured to Teva with a pay and welcome package worth up to $52 million, which includes $20 million in cash upfront. The Teva board is expecting Schultz, who had a long tenure at Novo Nordisk before tackling Lundbeck, to work some magic for the Israeli drugmaker. But the difficulties he will face were on public display in recent days when rating agency Fitch marked Teva debt as junk after the company last week slashed its 2017 guidance for the third time.