Danish pharmaceutical Lundbeck initiates major restructuring

On 19 August, 2015 the global pharmaceutical company Lundbeck from Denmark, specialized in brain diseases, announced the initiation of a restructuring programme which will reduce the total cost base by approximately DKK 3 billion with full effect in 2017. The programme is intended to significantly improve profitability and improve the company’s value creation.

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Higher profitability is needed to be able to invest in future profitable growth initiatives leading to better treatments for patients and secure a competitive return on investment and thereby secure value creation.

“Together with my leadership team, I believe this programme will make Lundbeck drive sustainable value creation for all our stakeholders. We are aware that these decisions will affect many of our employees and we will strive to support these employees as we implement the changes,” said President and CEO Kåre Schultz.

 

The pharmaceutical, specialized in brain diseases, will restructure headquarter functions and commercial operations in Europe and other markets which are expected to lead to a reduction of around 1,000 employees. In connection with the restructuring programme provisions and write-downs at the level of DKK 1.7 billion will be made in the third quarter 2015.

As part of the restructuring programme a reclassification of DKK 4.8 billion is included as research and development costs in the second quarter 2015. The reclassification is a change in accounting estimate based on management’s reassessment of certain previously capitalized product rights.

Financial guidance for 2015 is revised. Lundbeck now expects revenue around DKK 14.0 billion and core EBIT to be around DKK 0.5 billion. Reported EBIT is expected to be negative at around DKK 7.0 billion

In the past few years, Lundbeck has gone through major restructurings of its European commercial infrastructure. However, it is necessary to further adjust the commercial set-up primarily in Europe. Lundbeck intends to emphasize the focus on the following products: Abilify Maintena, Brintellix, Northera, Onfi and Rexulti.

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Furthermore, Lundbeck plans to capture savings through restructuring of all headquarter functions, further minimize G&A functions at affiliates and also expand the newly established Business Service Center in Krakow in Poland. In R&D a number of cost reduction initiatives have been identified including closure of selected early-stage projects.

Lundbeck expects that this restructuring programme will affect approximately 1,000 employees. Final estimates for programme costs, benefits and headcount impact in all areas of the business are subject to completion of applicable consultation processes.

It is expected that the programme will reduce the total cost base by approximately DKK 3 billion in 2017.

“When the restructuring programme is finalized, 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. Further details regarding the financial outlook will be presented in connection with the announcement of the 2015 Full Year results in February 2016,” writers Lundbeck.

Lundbeck now expects core profit from operations (core EBIT) assuming constant exchange rates to be around DKK 0.5 billion compared to the previous guidance around DKK 0 for 2015. Following the announced restructuring programme, Lundbeck is now also providing guidance for reported operating profit (EBIT), which is expected to be negative around DKK 7.0 billion.

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For more than 50 years, Lundbeck have been at the forefront of research within neuroscience. Their key areas of focus are alcohol dependence, Alzheimer’s disease, bipolar disorder, depression/anxiety, epilepsy, Huntington’s disease, Parkinson’s disease, schizophrenia and symptomatic neurogenic orthostatic hypotension (NOH).

An estimated 700 million people worldwide are living with brain disease and far too many suffer due to inadequate treatment, discrimination, a reduced number of working days, early retirement and other unnecessary consequences. Every day, we strive for improved treatment and a better life for people living with brain disease — Lundbeck call this Progress in Mind.

Lundbeck have research centres in China, Denmark and the United States and production facilities in China, Denmark, France and Italy.

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