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Strong Q4 as Brintellix gets closer to cognition

  • 07 Mar 16

Q4 15 ahead of expectations Lundbeck’s core numbers for Q4 15 and FY 15 came in ahead of market expectations as well as its own guidance. Sales for the quarter grew 7% at LC and 15% in DKK to c.DKK3.7bn (against our expectation of c.DKK3.3bn), fuelled by strong growth in five key products (combined up 142%) as well as healthy forex benefits, offset to some extent by the generic erosion of Cipralex (Europe and Canada) and Ebixa (Europe). The key development, however, was on the profitability front, where excellent cost control in administration and R&D (thanks to restructuring efforts) allowed the company to report higher-than-expected core EBIT of DKK73m. For the full year, while sales were flat at LC (+8% in DKK) to DKK14.6bn (vs. the company’s guidance of DKK14bn), core EBIT declined 31% to DKK847m (vs. the company guidance of DKK700m). At the reported level, EBIT and net profit came in slightly below our expectations at a loss of DKK6.8bn and DKK5.7bn, respectively, mainly on account of the impairment/reclassification of products’ rights charges of c.DKK5.7bn (mainly related to Rexulti and Abilify Maintena) and the restructuring expenses of c.DKK1.1bn recognised during the year. For FY 16, management sees (at LC) revenue of DKK13.8-14.2bn and EBIT of DKK1-1.2bn. This factors in the loss of Azilect sales in Europe (FY 15: DKK1.3bn) as it returned rights back to Teva. While there will be no dividend pay-out for FY 15, the company has revised its dividend pay-out range from 25-35% to 30-40%. It has also announced its long-term EBIT margin target of 25% (three to five years). It has doubled its executive management team by adding three new members – Lars Bang, Staffan Schüberg and Jacob Tolstrup.

Recovering and reorganising under the CEO’s ‘Kare’

  • 26 Aug 15

The repackaged Lundbeck under the new CEO, Kare Schultz, reported better than expected Q2 15 results (beating consensus by c.4%), sweetened further by an unexpected guidance upgrade. More critical, however, was the announcement of a major restructuring programme to cut down the total cost base by c.DKK3bn by 2017 (c.DKK1.5bn by 2016) and restore profitability. The programme includes – rationalisation of European commercial operations (management aims to cut headcount by c.1,000, 18% of the current employee base) as well as cutbacks on R&D (including closure of certain early-stage projects). The total cost associated with the restructuring has been estimated at DKK1.7bn, to be recognised in Q3 15. In addition, the company has also recognised DKK4.8bn (included in R&D in Q2 15), related to the change in accounting of product rights/ milestone payments. Based on the above, management has now guided for a full-year operating loss of DKK7bn (we had earlier estimated a DKK1bn loss). On the operational front, Lundbeck recorded a 5% cc decline, better sequentially (10% cc decline in Q1 15), but sluggish on a yoy basis (Q2 14 – up 1% cc) — a currency tailwind of 10%, however, led to a 5% reported growth vs. a 1% and 2% decline in Q1 15 and Q2 14, respectively. Generic erosion on Cipralex and Ebixa remain overhangs, but were offset by strong performances (slightly higher than our estimates) from newer launches including Brintellix, Onfi, and Abilify Maintena. Following the encouraging results, management has upgraded it FY 15 guidance: revenue estimated to be c.DKK14bn from the previous range of DKK13.2–13.7bn, while core EBIT is now expected to be c.DKK500m (c.DKK0m earlier).