Lundbeck shredding 1,000 jobs, 17% of workforce—and its stock is up big
- When Lundbeck's new CEO, Kaare Schultz, announced that the company will be laying off 17% of its workers on Wednesday, the company's stock hit a 13-year high.
- The overall plan is to eliminate 1,000 jobs and restructure the Copenhagen headquarters and commercial operations in Europe.
- The reason for the large-scale restructuring is the need to compensate for generic competition that is negatively affecting Lundbeck sales.
On a business level, layoffs are a reasonable and logical response to generic erosion of sales. In Lundbeck'
s case (as in many other cases), the declines in sales after patent expiration have been dramatic. The biggest hits came when the antidepressant Cipralex and the Alzheimer's disease drug Ebixa lost patent protection. Now the focus will be on the future and on new drugs, such as the much-touted antidepressant Brintellix and the schizophrenia drug, Rexulti.
Financials are looking solid. Although the company estimated that the restructuring will cost roughly $1.6 billion, Lundbeck has upgraded its full-year revenue estimates from $1.8 billion to $2 billion.