Lundbeck slashes headcount as generics bite

Danish drugmaker Lundbeck plans to cut 17 per cent of its workforce in a bid to trim costs by 3 billion kroner a year from 2017.

The bold move by new chief executive Kåre Schultz comes as the central nervous system drugs specialist is still feeling the impact of patent expiries to antidepressant Cipralex (escitalopram) and Alzheimer's disease drug Ebixa (memantine) and the fact that new products have yet to fully compensate for lost revenues.

Around 1,000 jobs will go as a result of the restructuring of Lundbeck's Copenhagen headquarters and 'commercial operations in Europe and other markets', said the firm, which reported a currency-adjusted 7 per cent decline in revenues in the first half of the year to 7.19 billion kroner ($1.06 billion).

A recently-established business centre in Krakow, Poland, will be a beneficiary of the reshuffle and is marked for expansion, according to Lundbeck. All told, the restructuring will add around 1.7 billion kroner in costs in the third quarter of 2015.

"When the restructuring programme is finalised, we expect to significantly improve the company's profitability and we expect to see positive reported operating profit already in 2016 with further improvement in 2017," said Lundbeck in a statement.

The 3 billion kroner in annual savings will boost profitability at the company and allow it to invest in the roll-out of new drugs, such as new antidepressant Brintellix (vortioxetine), depot antipsychotic Abilify Maintena (aripiprazole) – both of which topped expectations in the first half of the year – and just-launched antipsychotic Rexulti (brexpiprazole).

After a slow start in the market, Brintellix has started to gain momentum with first-half sales of 238 million kroner, up more than five-fold on the same period of 2014. Similarly, Abilify Maintena grew more than 300 per cent to 277 million kroner.

Onfi (clobazam) for the treatment of Lennox-Gastaut syndrome also performed well, with sales doubling to 793 million kroner in the half.

Analysts and investors had been calling for a streamlining effort at Lundbeck well ahead of Schultz taking over the helm and shares in the company climbed after the announcement.

Lundbeck also increased its revenue forecast for this year to 14 billion kroner from early predictions of 13.2-13.7 billion kroner.