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Lundbeck Cuts Forecasts on Product Costs; Shares Plunge

Dec. 19 (Bloomberg) -- H. Lundbeck A/S, the Danish drugmaker that won regulatory backing last week to sell a pill against binge drinking, cut sales and profit forecasts for the next two years because of higher new-product costs and generic competition. The stock fell to the lowest in almost 13 years.

Revenue in 2013 will total 14.1 billion kroner ($2.5 billion) to 14.7 billion kroner, and earnings before interest and taxes will amount to 1.6 billion kroner to 2.1 billion kroner, Lundbeck said in a statement today. For 2014, revenue will be “around 14 billion kroner” with a profit of 500 million kroner to 1 billion kroner, depending on new drugs’ performance.

The lower forecasts reflect the expense of introducing Selincro, the drug to treat alcohol abuse, as well as a once-monthly version of the Abilify schizophrenia treatment and Brintellix, a depression treatment, the Copenhagen-based company said. Lundbeck also will have higher research costs for developing an experimental drug for Alzheimer’s disease and face generic competition for its older Alzheimer’s treatment Ebixa next year as well as its antidepressant Cipralex as of 2014.

“Consensus and our forecasts were double the new 2014 EBIT outlook,” said Peter Welford, an analyst at Jefferies International Ltd. in London. “It’s a combination of slightly faster genericization and sustained level of investments, and that squeeze is greater than what we were expecting.”

26% Decline

Lundbeck dropped 15 percent, the biggest decline since June 8, 2009, to 82.15 kroner in Copenhagen. The stock has fallen 24 percent this year, valuing the drugmaker at 16.1 billion kroner, and is at the lowest price since February 2000.

The drugmaker predicted in November 2010 that full-year revenue in 2013 and 2014 would exceed 14 billion kroner, and that profit would amount to more than 2 billion kroner. Analysts expected sales of 14.5 billion kroner next year and 14.7 billion kroner in 2014, with earnings of 2.3 billion kroner each year, based on average estimates compiled by Bloomberg.

“We are in a transition phase where we are replacing old business with new business, Chief Executive Officer Ulf Wiinberg said on a conference call with investors and analysts. ‘‘To seize these opportunities, we are increasing our investments,’’ which will peak in 2014.

Investment Estimate

Spending on developing the Alzheimer’s treatment Lu AE58054 will total at least 1 billion kroner from 2013 through 2015, Lundbeck said. Late-stage studies of the drug will begin in the middle of next year, and Lundbeck is doing without a partner manufacturer following ‘‘very attractive’’ feedback from the U.S. Food and Drug Administration, Wiinberg said.

‘‘If we had been less bullish, we would have waited and partnered’’ before starting the new trials, Wiinberg said. Clinical trials thus far have shown ‘‘a strong effect on cognitive scale.’’

Lundbeck is scheduled to present results from mid-stage trials on the drug at a scientific meeting in July in Boston.

‘‘It’s very difficult for investors and for us to assess as we haven’t seen the phase-2 data,” Jefferies International’s Welford said. “Whether the company will deliver growth in revenue from 2015 is in the balance.”

Lundbeck said it will provide detailed financial forecasts for 2013 on Feb. 6, when it announces 2012 earnings.

To contact the reporters on this story: Phil Serafino in Paris at pserafino@bloomberg.net; Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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