Global Insight Perspective | |
Significance | The Copenhagen-based firm more than doubled its net profit, largely as a result of finance-related gains combined with a weak comparable first quarter in 2006. Sales of blockbuster drug Cipralex/Lexapro and of Alzheimer’s disease treatment Ebixa helped drive revenue. |
Implications | Despite reporting figures largely in line with market expectations, the discontinuation of Phase III trials for insomnia treatment gaboxadol, which was being co-developed with U.S. drug giant Merck, represents a major setback to Lundbeck’s overall future prospects. Gaboxadol was expected to fill the revenue gap left when Cipralex/Lexapro’s patent expires. |
Outlook | The main sticking points in the company’s future financial performance are still the weak pipeline of late-stage compounds allied to Lundbeck, and the fact that Lexapro partner Forest is having to fend off generic drug-makers seeking approval for copycat versions of the key antidepressant. |
Better but Still Uninspiring
Danish pharmaceutical firm Lundbeck posted first-quarter revenue of 2,583 million kroner (US$469.4 million), corresponding to a year-on-year hike of 16%. Finance-related achievements combined with a poor first quarter of 2006 to help more than double the Copenhagen-based company’s net profit, which reached 466 million kroner. Cost of sales amounted to about 19% of total revenue. This was mainly due to better sales and a rise in shipments of bulk escitalopram (the active ingredient of Lundbeck’s blockbuster antidepressant drug Cipralex/Lexapro) to its U.S. partner Forest Laboratories. Research and development (R&D) expenditure increased by 4% and accounted for 18% of revenue in the first quarter, whereas the administrative costs included expenses concerning the closure of Lundbeck’s commercial office in Philadelphia (U.S.).
Lundbeck: Q1 2007 Results | ||
Q1 2007 (DKK Mil.) | % Change Y/Y (*) | |
Total Revenue | 2,583 | 16 |
Cost of Sales | 497 | 18 |
Distribution & Administration | 955 | 5 |
Research and development (R&D) | 473 | 4 |
Operating Income ** | 450 | 46 |
Total U.S. revenue | 631 | 29 |
Total European revenue | 1,485 | 9 |
Source: Lundbeck, with the exception of Global Insight’s Operating Income estimate | ||
Blockbuster drug Lexapro/Cipralex continues to be the company’s best-seller, with combined sales of 1,618 million kroner. In Europe, Cipralex and Alzheimer’s disease treatment Ebixa continue to be revenue drivers, with growth rates of 13% and 24% respectively, compared to the first quarter of last year. However, U.S. Lexapro sales have been hit hard by heightened competition from generic versions of other off-patent antidepressants.
2007 Q1 Net Sales of Lundbeck’s Top Products | ||
Brand* | Q1 Net Sales (DKK Mil.) | % Change Y/Y |
Cipralex | 990 | 18 |
Lexapro | 628 | 30 |
Ebixa | 391 | 26 |
Azilect | 34 | 349 |
Serdolect | 10 | N/A |
Other pharmaceuticals | 465 | -13 |
Other revenue | 65 | -17 |
Source: Lundbeck, | ||
On the R&D front, Lundbeck suffered a major setback at the end of March 2007 when it announced the failure of late stage insomnia treatment Gaboxadol, which was being co-developed with U.S. pharmaceutical giant Merck. Data from Phase III clinical trials did not support continued clinical development of the drug in the treatment of insomnia. As a result, Lundbeck and Merck will not file a new drug application for gaboxadol with the U.S. FDA, which was eagerly awaited for mid-2007, or other regulatory agencies.
Meanwhile, in March Lundbeck announced the start of Phase II trials of Lu 31-330 in patients with schizophrenia, and has also just initiated Phase I trials with a new candidate, Lu AA39959, for the treatment of psychiatric diseases.
Outlook and Implications
On the back of a better-than-expected first-quarter, Lundbeck has reiterated its full-year guidance for 2007 by saying it expects an operating profit of more than 2.5 billion kroner, with an operating margin of 25% and an investment level of about 650 million kroner. Despite the performance falling largely in line with market expectations, the major setback with the discontinued development of Phase III gaboxadol is a major dent in Lundbeck’s future financial prospects. The drug was expected to fill the revenue hole left when the patent for its blockbuster drug Lexapro/Cipralex expires in 2014. Lundbeck and Forest have already had to fight back against generic firms seeking approval for copycat versions of their star antidepressant. In fact, on Monday (7 May) the Danish firm suffered a setback in the Lexapro/Cipralex patent infringement case against Israel-based generics giant Teva in the United Kingdom. Furthermore, the late-stage gaboxadol compound was supposed to pave the way for the deployment of a sales force in the U.S. pharmaceutical market. The announcement of the Phase I trial is not likely to have appeased concerns over the company’s weak pipeline and its future strategy.
Related Articles
- Denmark: Israel: 7 May 2007: Setback for Lundbeck in Cipralex U.K. Patent Case
- Denmark: United States: 29 March 2007: Merck & Co, Lundbeck Drop Investigational Insomnia Drug Gaboxadol
- Denmark: 7 March 2007: Lundbeck Reports 30% Fall in FY Net Profit