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Lundbeck’s key products shine in Q2 but problems remain

Faces increasing patent losses

Lundbeck

Rising demand for Lundbeck’s four key products enabled the company to narrowly beat analyst sales expectations in the second quarter.

Sales of Rexulti (brexpiprazole), Abilify Maintena (aripiprazole), Trintellix (vortioxetine) and Northera (droxidopa) increased by 20% to 44% in the quarter, resulting in overall sales of those key products coming in above analyst expectations.

The performance of those products, which Lundbeck views as its four strategic brands, ensured total sales beat analyst expectations by 1%. Sales of the four key products accounted for more than half of Lundbeck’s sales in the quarter.

Away from those products, the picture for Lundbeck is mixed. Earnings fell short of expectations, in part because selling, general and administrative expenses (SG&A) rose in relation to revenue.

Lundbeck attributed the increased SG&A ratio over the first half of the year to falling sales of seizure drug Onfi (clobazam), which now faces generic competition. Sales of Onfi fell 65% in the second quarter, continuing the trend seen over the first three months of the year.

Sales of antidepressant Cipralex (escitalopram) and anti-epileptic Sabril (vigabatrin) also suffered  double-digit declines, more than offsetting growth of Lundbeck’s four strategic brands. Overall, sales fell 10% in the quarter, led by an 11% drop in revenues from North America.

The declines come against a backdrop of Lundbeck’s faltering efforts to generate clinical data to fuel growth of new and existing products.

Over the past year, a phase 3 trial of AF35700 in schizophrenia has missed its primary endpoint, leading Lundbeck to stop development of the drug, and Rexulti suffered a late-phase failure in bipolar mania.

Lundbeck is pushing ahead with other internal programmes, including mid- and late-phase trials of Rexulti in post-traumatic stress disorder and borderline personality disorder.

However, Lundbeck may need acquisitions to complement its own projects. Lundbeck closed the $250m acquisition of Abide Therapeutics earlier in the year but still has the capacity to do more deals.

‘Following the Abide Therapeutics acquisition in 2Q19, Lundbeck's total deal capacity is around $4bn-5bn ... so significant firepower remains. Lundbeck seeks to expand its therapeutic scope to include a broader range of brain diseases,’ analysts at Jefferies wrote in a note to investors.

Lundbeck’s ability to use that firepower effectively could be critical in the coming years given forecast headwinds for existing products. Notably, patent protection for Northera is due to expire in 2021, exposing one of Lundbeck’s four strategic brands to generic competition.

Article by
Nick Taylor

14th August 2019

From: Sales

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