Lundbeck Cuts Its European Sales Teams By A Third, As It Builds Up Its Presence In the U.S. And Emerging Markets
This article was originally published in The Pink Sheet Daily
Executive Summary
Lundbeck becomes the latest company in Europe to announce job cuts, as austerity, generic competition and unclear pricing and reimbursement practices create uncertainties.
The Danish company Lundbeck announced June 14 that it intends to reduce the size of its commercial organization in Europe, primarily by making cuts in its general practitioner-focused sales teams of around 600 positions over the next 12 months.
The company is citing increasing uncertainties in Europe on pricing and reimbursement, and on health care reforms, as being partly to blame for the move. But the restructuring also will allow it flexibility to prepare for the launch of its research pipeline of specialty products, to invest in growth opportunities in the U.S. and emerging markets, and to maintain a tight control on costs. The move also might allow greater use of partnerships and alliances with other companies to market its products, a Lundbeck spokesman said.
The cuts represent a drastic reduction of around a third of the sales and marketing employees that Lundbeck has in Europe. But with its lead product, the antidepressant Cipralex (escitalopram), facing increasing generic competition in Europe, and its new slate of specialty products not yet on the market, Lundbeck's options for achieving cost efficiencies were limited. Last year, the company went through a round of cutting R&D jobs in the U.S. and Denmark (Also see "Lundbeck Cuts 150 R&D Jobs To Control Costs Ahead Of Key Patent Expiry" - Pink Sheet, 10 Aug, 2011.).
Sales of escitalopram by Lundbeck (as Cipralex) and the U.S. licensee, Forest Laboratories Inc. (as Lexapro), totaled DKK 8.5 billion ($1.4 billion) in 2011, just over half of the company's total revenues. However, Lexapro lost U.S. marketing exclusivity in March 2012, and the impact on Lundbeck's revenues is expected to be rapid.
The specialty products in Lundbeck's research pipeline include Selincro (nalmefene) for alcohol dependence, which was submitted for marketing approval in Europe in December 2011. A once-monthly depot injection of Abilify (aripiprazole), developed for use in schizophrenia in a collaboration with Otsuka Pharmaceutical Co. Ltd. was submitted for approval in the U.S. in November 2011 (Also see "Lundbeck/Otsuka Global Alliance Will Support Lundbeck's Move Into U.S. Psychiatry Market" - Pink Sheet, 11 Nov, 2011.). A new antidepressant for major depressive disorder, Lu AA21004, is expected to be filed for approval in the U.S., Europe and other markets in the second half of 2012.
Merck Serono and AstraZeneca Also Restructuring
Lundbeck is just the latest in a string of European companies to announce job cutbacks. Merck Serono SA is currently negotiating with employees in Geneva on the proposed closure of its offices there, which were the headquarters of Serono before its 2006 acquisition by Merck KGAA (Also see "Merck KGAA Begins Transformation Effort By Closing Geneva Site" - Pink Sheet, 25 Apr, 2012.).
The proposed closure has not gone down well with Swiss employees and local politicians, even though several working groups have been set up to examine alternatives to closure for the facilities, such as the creation of a biotech incubator. Discussions with management have been punctuated with walkouts by staff, who are perhaps mindful of Novartis AG's decision earlier this year to reverse plans to close its Swiss facility in Nyon after a series of employee strikes and political interventions (Also see "For Novartis, 2012 Is Set To Be A Bumpy Ride" - Pink Sheet, 25 Jan, 2012.).
AstraZeneca PLC also is in the midst of a restructuring announced in February 2012, with plans to slash 12% of its workforce, or more than 7,000 positions, in the next three years (Also see "AstraZeneca Goes Virtual In Neuroscience R&D As Part Of Workforce Reduction" - Pink Sheet, 2 Feb, 2012.). Its plans include closing R&D at its facility in Sodertalje, Sweden, although manufacturing will continue there.
In a previous restructuring in 2010, it took two years, until January 2012, for AstraZeneca to sell off its research facility in Lund, Sweden – it was bought eventually for SEK 450 million ($64 million) by Medicon Village AB, a company owned by the Mats Paulsson Foundation for Research, Innovation and Societal Development. Mats Paulsson is one of the founders behind the Swedish construction conglomerate Peab AB, and the facility is now a thriving life sciences bioincubator.