Missed revenue and slow launches cloud Lundbeck outlook

An underwhelming Brintellix sales trajectory and lower than expected quarterly revenue will do little to persuade sceptical Lundbeck watchers that the group's strategy for rebounding from the loss of Cipralex will be effective.

Analysts from three banks have downgraded Lundbeck shares in the past week on disappointing sales of new products and added costs from the acquisition of Chelsea Therapeutics (Lundbeck gets Chelsea out of jail, May 8, 2014). Signs that the Danish company can reinvigorate Brintellix as well as execute launches of Northera and brexpiprazole might return it to favour.

Wrong drug, wrong place?

Lundbeck has chosen to continue its focus on mental health at a time when sales growth has stalled as huge sellers like Cymbalta and Abilify have lost patent protection. Brintellix is a depression drug launched in January, a year after Cymbalta came off patent, and so far has struggled with a lack of differentiation.

Second-quarter Brintellix revenue, disclosed today, was DKr38m ($6.8m), and for the first half it was DKr46m, a run rate that looks discouraging compared with EvaluatePharma’s consensus of $65m when US co-promotion sales and royalties from the US partner, Takeda, are counted.

The issue for Brintellix is its limited differentiation from established generic products, a key factor in Goldman Sachs’s decision earlier this week to downgrade Lundbeck to a “sell”. The bank’s rationale is that Lundbeck trades at a 25% premium to European pharma peers on a price/equity basis but has a sales growth forecast that is largely in line with those same peers.

Goldman Sachs joined JP Morgan and UBS in downgrading Lundbeck in the past week, the former dropping its price target from DKr146 to DKr138 and the latter from DKr156 to DKr135. Shares were at DKr122.80 in mid-afternoon trading, with investors showing less caution as they drove the price up 2% today.

In an investor call today, chief executive Ulf Wiinberg stressed the efforts to show that Lundbeck’s depression pill was differentiated, which include data released earlier this year that could support claims that Brintellix impedes cognitive and sexual function less than competing antidepressants. “When we do this we think we will be able to bring in something that nobody else has been able to in [the US] market,” Mr Wiinberg said.

Lundbeck’s next drug awaiting approval has a similar problem to Brintellix. Brexpiprazole is a modified Abilify to be used as an add-on in depression and schizophrenia. It was filed in early July by Lundbeck and partner Otsuka.

JP Morgan analysts cite mixed tolerability data – better than Abilify on movement disorders in depression patients, worse on weight gain – and some unknowns on efficacy in the form of three phase III trials that have yet to read out as reasons to be cautious about its promise.

Chelsea, Chelsea, they believe

Then there is the Chelsea acquisition that brought on board Northera, a tricky neurogenic orthostatic hypotension project to treat lightheadness in Parkinson’s disease patients that earned US approval at the second time of asking.

Aside from the $530m up-front payment to snare the North Carolina-based company, the buyout has added DKr500m in incremental costs to Lundbeck’s budget. The payoff: Mr Wiinberg said the group would seek “orphan drug-like pricing”; EvaluatePharma’s consensus forecasts Northera as Lundebeck’s biggest seller in 2020, with sales of $506m.

With Northera expected to be launched towards the end of the year and the potential for brexpiprazole to hit the market in 2015 – not to mention the fact that Brintellix is still in launch mode along with products such as long-acting Abilify IM and the anti-alcoholism drug Selincro – 2015 will be a high-cost year, Mr Wiinberg acknowledged.

This is an ambitious strategy, and if Lundbeck were in another field – oncology, for example – there might be no doubt of its payoff. Working in CNS, and with products that offer minor differentiation, makes it look much more of a gamble, so it is no surprise to see downgrades until the Brintellix launch trajectory shows signs of steepening.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @JonEPVantage on Twitter

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