Lundbeck is to cut its workforce by more than a sixth in a bid to reduce its cost base in the face of stagnant sales and disastrous share performance.
The company’s share earnings in the first half of this year plummeted 82%, while revenues only saw a 2% lift to DKK 7.2bn ($1.1bn) following the loss of sales from drugs such as depression treatment Cipralex (escitalopram).
In order to improve its profitability Lundbeck will axe around 1,000 of its 5,801 employees, with the cuts being felt across its headquarter functions and commercial operations in Europe and a number of other markets.
The Danish pharma company said it would take a DKK 1.7bn hit in the third quarter of this year from the cuts, but by 2017 its total cost base would be reduced by 3bn Danish Krone ($444.6m).
The restructure is one of the first major moves by new president and CEO Kare Schultz, who took up his post in May.
He said: “I am pleased with the sales growth of our new products but I am not satisfied with our profitability.
“I believe the restructuring programme announced today is necessary and will make Lundbeck drive sustainable value creation for all our stakeholders.”
The cuts come three years after Lundbeck last restructured its operations, with the loss of 600 jobs in 2012, but the firm said it was necessary to “further adjust the commercial set-up primarily in Europe”.
“We are aware that these decisions will affect many of our employees and we will strive to support these employees as we implement the changes,” Schultz said.
In addition to changes at its headquarter functions, Lundbeck wants to see further savings by minimising general and administrative functions at its affiliates and by expanding its new business service centre in Krakow in Poland.
Meanwhile, the company has a number of cost reduction initiatives planned in its R&D functions, including halting some of its early-stage research projects.
Lundbeck said final estimates for its programme costs and benefits, and their impact of headcount, were subject to the completion of consultation processes.
The company made a DKK 56m ($8.3m) loss in 2014, but its position has rapidly worsened this year, with the first six months of 2015 showing a DKK 4bn ($598.7m).
The restructure comes after revenue in Europe fell by 35% to DKK 1,952m ($289m) in the first six months of this year.
Nevertheless, Lundbeck continues to see strong gains in the US, where revenues in the first half of 2015 climbed 77% to reach DKK 2882m ($427m) – some 40% of the company’s total revenue.
Lundbeck’s focus will now turn more to its newer drugs such as Brintellix (vortioxetine), Northera (droxidopa), Onfi (clobazam) and Abilify Maintena (aripriprazole) which saw a 190% growth in sales.