Lundbeck cuts jobs and pipeline but at least the money's all right - for now
This article was originally published in Scrip
Lundbeck has announced plans to cut up to 175 jobs in Denmark and the US (12.5% of 1.400 its R&D employees) as it seeks to outsource more R&D work. At the same time, it removed four programmes from its clinical development pipeline.
Nevertheless, the Danish firm reported strong revenue growth and said it now expected to achieve the upper end of previous guidance ranges for full-year revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) growth.
Pipeline projects that have been axed are: Lu AA24493, a tissue protective cytokine that was in Phase II for Friedreich's ataxia but failed to meet the key efficacy endpoints; Lu AA39959 for bipolar disorder, which has been suspended since May 2009 because additional preclinical work investigating its concept is ongoing; and Lu 02-750 and Lu AE04621, two Phase I candidates for which early results did not support further development.
The company also noted that recruitment into two Phase III trials of desmoteplase in ischaemic stroke had been slower than expected. This means that it no longer expects to file for approval in the second half of 2012, but more likely in the first half of 2014.
"A fundamental part of Lundbeck's R&D strategy is to establish greater flexibility in the use of external and internal capabilities," it said. "This allows the company to secure short-term deliverables and execution or the R&D strategy despite reducing internal capacity." It will cut its R&D workforce by around 125-175 people, with jobs to be lost primarily in the US research base in Paramus, New Jersey, and at its headquarters in Denmark.
Lundbeck saw total second-quarter revenues grow at 9% to DKK4.1 billion ($780 million), with strong sales of key products. It reiterated full-year guidance of revenues rising from DKK14.8 billion to DKK15.3-15.8 billion, with EBITDA of DKK4.3-4.6 billion (from DKK4.4 billion), EBIT of DKK3.3-3.6 billion (from DKK3.4 billion) and net profit of DKK2.3-2.6 billion (from DKK2.5 billion).
However, this trend will come under increasing strain with ongoing patent expiries of its best-selling product, the antidepressant escitalopram, which is marketed as Cipralex in Europe and Lexapro in the US. The company has been reducing its reliance on these two brands, but they still account for more than half of its revenues. Cipralex has already lost market exclusivity in territories including Finland and Spain, while Lexapro faces the expiry of its US patent in March next year.
However, the firm believes it has major future revenue-generators lined up to replace sales lost to generic competition. These include the Japanese launch of escitalopram this month (for which it foresees potential peak annual royalties of more than DKK500 million) and the roll-out of the antipsychotic Sycrest (asenapine) this year (which it says has the potential to generate more than DKK1 billion a year). From next year it hopes to add the launch of certain of Cephalon's products in specific territories (more than DKK500 million peak annual revenues predicted), the anti-epileptic Onfi (clobazam; potential of more than DKK1 billion) and nalmefene for alcohol dependence (potential of around DKK2.5 billion).
During the second quarter, Cipralex sales grew by 2% to DKK1.5 billion while revenue from Lexapro, which is marketed by Forest Laboratories, grew by 13% to DKK715 million.
Lundbeck's latest job cuts come after it announced it would cut around 50 jobs in the US and Denmark in September last year (scripintelligence.com, 23 September 2010).