Danish drugmaker Lundbeck is cutting about 1,000 jobs as new management looks to rein in spending, curtail R&D and focus on a handful of new drugs tabbed to drive growth.
Kåre Schultz, Lundbeck's new CEO and the man once considered in line to take over local giant Novo Nordisk ($NVO), said the layoffs are part of a widespread effort to cut costs and create value. Lundbeck expects to take a hit of around 1.7 billion Danish kroner ($250 million) tied to the job cuts, but the move will help generate to about 500 million kroner ($70 million) in profits for the full year, the company said, besting Lundbeck's earlier projection of breaking even in 2015.
Most of the cuts will center on Lundbeck's Valby, Denmark, headquarters, and the company is planning to cut the cord on some early-stage R&D projects to preserve cash. The idea is to lop off extraneous functions and home in on 5 drugs the company believes can pave the way for its future: the Otsuka-partnered antipsychotic Abilify Maintena; the antidepressant Brintellix; the blood pressure drug Northera, acquired in a $658 million deal for Chelsea Therapeutics; the seizure treatment Onfi; and the recently approved schizophrenia therapy Rexulti.
As for R&D, "a number of cost-reduction initiatives have been identified," the company said, including some unspecified early research Lundbeck no longer plans to pursue. The point, Lundbeck said, is to deliver "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 restructuring is the first major move from Schultz, who came aboard in May after serving as president at Novo. He inherited a drugmaker on the decline, grappling with patent losses and the resignation of CEO Ulf Wiinberg, who stepped down after violating the company's conflict of interest rules. Schultz has acknowledged that Lundbeck is working through "challenging times," and the new chief believes a slimmer structure will help provide for a brighter future.
"Together with my leadership team, I believe this program will make Lundbeck drive sustainable value creation for all our stakeholders," Schultz said in a statement. "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."
- read the statement