Drugmaker H. Lundbeck to Cut Staff, Costs

Three months into the post, Kå re Schultz, the chief executive of H. Lundbeck A/S, has produced a tough prescription to restore profit at the Danish drug maker: cut costs by 20% and staff by 17%.

Mr. Schultz announced a company overhaul as the company swung to a net loss of 3.91 billion Danish kroner ($579 million) in the three months ending June 30, from a net profit of 144 million kroner in the same period a year earlier.

The result included a 4.8 billion kroner charge for product rights that won't materialize as a result of the restructuring. Revenue rose 5.2% to 3.63 billion kroner, as increasing sales in the U.S. helped offset a 28% decline in Europe.

"I am not satisfied with our profitability," said Mr. Schultz, who joined Lundbeck in May after being snubbed for the top job at his former employer and bigger Danish rival, insulin maker Novo Nordisk A/S.

The Nordic region's third biggest drug maker by sales said it will shed about 1,000 jobs, mainly in Europe, as it restructures its commercial operations there amid falling European sales, fierce competition from cheaper generic drugs and a tougher regulatory environment.

The company, which specializes in brain disease and neurological disorders, hopes to cut costs by roughly 3 billion kroner by 2017.

The restructuring program is expected to lead to an operating loss of around 7 billion kroner this year, Lundbeck said, but help return the company to a profit in 2016.

The firm spent years over-investing in a range of projects and is now paying the price for a strategy that left it with "too much in the early stage pipeline," according to Alm Brand analyst Michael Friis Jorgensen.

The company said it will back out of several of these early initiatives, none of which have been disclosed, and focus on developing a core set of five products, including antidepressant Brintellix and Abilify Maintena, a treatment for schizophrenia.

Lundbeck said it saw robust sales growth of most of its core products, but sales of antidepressant Cipralex and Azilect, a treatment of Parkinson's disease, declined because of generic competition.

The company raised its full-year revenue guidance on a strong performance of Onfi, a treatment of Lennox-Gastaut syndrome, and Xenazine, for the treatment of chorea associated with Huntington's disease.

It now forecasts revenue around 14 billion kroner, up from between 13.2 billion kroner and 13.7 billion kroner previously.

Lundbeck shares soared nearly 22% to 205.30 kroner on the Copenhagen bourse, their highest level in almost 13 years.

Write to Anna Molin at anna.molin@wsj.com

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(END) Dow Jones Newswires

August 19, 2015 11:15 ET (15:15 GMT)

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