H. Lundbeck A/S

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H. Lundbeck A/S

Otilliavej 92500
Telephone: (45) 36301311
Fax: (45) 36301940
Web site: http://www.lundbeck.com

Public Company
Incorporated: 1915 as H. Lundbeck & Co.
Employees: 3,002
Sales: DKK 5.62 billion ($694 million)(2000)
Stock Exchanges: Copenhagen
Ticker Symbol: LUN
NAIC: 3254 Pharmaceutical and Medicine Manufacturing

H. Lundbeck A/S is Denmarks second-largest pharmaceuticals company, behind Novo Nordisk. While a small player in the global pharmaceuticals market, the company is a giant within its specialty of drugs to treat diseases and disorders of the central nervous system. Lundbeck is the only such specialist in the world, and its research and development has propelled it to the number three position in Europe within the antidepressants category and to number six in the world for anti-psychotic drugs. The companys primary product is Cipramil, which has become one of the worlds most-prescribed new-generation antidepressants. That drug has been marketed as Celexa in the United States since 1998, where it has captured some 14 percent of the market in just three years. Cipramil alone accounts for some 82 percent of the companys sales, a situation the company hopes to correct in the first years of the new century with an ambitious new-product launch program of a new drug every three-to-five years. One of the companys most promising new medications, the anti-psychotic Serdolect, has been temporarily shelved because of concerns for potential side effects. Lundbeck operates subsidiaries in 29 countries and sales offices in an additional 14 countries; sales in Denmark represent only three percent of the companys nearly DKK 6 billion ($700 million) in revenues in 2000. Europe represents more than 70 percent of sales, while the United States contributes 21 percent of Lundbecks sales. The companys main manufacturing facilities are in Denmark, with additional production facilities in the United Kingdom and Italy. The companys research and development facilities are located at its headquarters site in Valby, Denmark. Lundbeck has been traded on the Copenhagen stock exchange since 1999; many of the companys shares are held by the Lundbeck Foundation. The company is led by Erik Sprunk-Jansen, who has been president and CEO since 1989 and has spearheaded the companys strong growth at the turn of the century.

World War I Trading Origins

Denmarks neutral position during World War I placed the country in position to build a flourishing trade with the warring nations in the rest of Europe. With government encouragement, many Danes set up their own import-export businesses. Among them was Hans Lundbeck, who had been trading in butter since the early years of that decade. In 1915, Lundbeck set up a new company, H. Lundbeck & Co., with the purpose of expanding his trading activities to include a wide variety of merchandise. Lundbeck set up a series of agencies to handle the buying and selling of goods which ranged from photographic equipment to production machinery to saccharin and even vacuum cleaners. Most of Lundbecks operations were conducted from his office in Copenhagen, with no need for warehouse or manufacturing facilities, as Lundbeck acted primarily as a broker.

The revaluation of the Danish currency following the war lowered the price on imports and Lundbecks business flourished. In 1924, Lundbeck hired Edouard Goldschmidt, who became a partner in the company. Goldschmidt added a new wing to the company, that of importing medicines and medicinal products, and, as such, Lundbeck introduced the Danish market to such products as Anusol, the painkiller Gelonida, laxatives and antiseptics, as well as various over-the-counter medicines. This product led the company to expand into the cosmetics and toiletries market as well.

Restrictions put into place by the Danish government during the Depression years led the company to begin bulk imports, rather than finished products. The company now was responsible for preparing and packaging, as well as marketing its line of medications and cosmetics. Lundbeck then launched into a new field, no longer simply marketing medications, but developing its own. In 1937, the company released its first company-developed medication, Epicutan, designed to aid in healing wounds. This growing activity led the company to relocate from its Copenhagen site to Valby. From there, the company took its first steps into organic research, constructing its own laboratories under the direction of Olof Hübner.

The Nazi occupation of Denmark in 1940 forced Gold-schmidt, who was Jewish, to withdraw from the company for the duration of the war. Yet the Lundbeck company was able to continue its workand open its first foreign subsidiary in neutral Swedenand soon made its first breakthrough in the pharmaceutical field when it developed the sulphonamide-based Lucosil, which proved effective in combating urinary tract infections. Production of Lucosil, based on hydrazine sulphate, quickly ran into trouble when supplies of the raw material were diverted for use as fuel for the V2 rocket program.

Slippers and Pharmaceuticals in the 1970s

Following the war, Lundbeck procured the rights to develop ketobemidon, a compound that had been created by the Germans then confiscated along with all of the countrys patents by the Allies after the war. Lundbecks laboratories refined the compound into its own brand, Ketogan, a highly effective pain reliever released in 1952. At the same time, the company had been developing its first antibiotic, Neomycin, based on a formula obtained from Nobel Prizewinner Selman Waksman. In the early 1950s, the company built its own microbiology laboratory for the culture of bacteria and development of antibiotics.

By then, both Lundbeck and Goldschmidt had died and the company reincorporated as a limited company in 1950, with Lundbecks widow, Grete, holding 50.5 percent of the companys shares, and the Goldschmidt family holding the rest. Grete Lundbeck also joined the companys board of directors, together with Olof Hübner, but retired in 1954, setting up the Lundbeck Foundation to control her shares in the company.

The company began placing more and more of its efforts on its pharmaceuticals development. At the end of the 1950s, the company had a new success with the 1958 launch of Truxal, a chlorpromazine-based medication that successfully eliminated that drugs side effects. Truxal, an anti-psychotic useful in the treatment of schizophrenia, marked the companys first foray into its later specialty field of central nervous system (CNS) disorders. In the meantime, however, Lundbeck continued its diversified trading companies, notably in the cosmetics and toiletries sector, but its product range remained as far-flung as the distribution of slippers.

The success of Truxal gave the company new funds for its research and development work, and through the 1960s the company introduced a number of new pharmaceutical preparations. In order to support its growth, Lundbeck opened new facilities in Lumsås, in the northwestern Zealand peninsula. That factory complex soon took over the companys active compound preparation.

Lundbecks products had long been marketed on a wider international scale, so that the companys growth was not restricted by the small Danish market. The companys international sales had, since the end of World War II, been handled through agreements with locally based sales agents, with the exception of its Swedish subsidiary. By the mid-1960s, the companys international sales represented 75 percent of its revenues, and the company moved to take its foreign operations into its own hands, setting up subsidiaries and sales offices in most of its foreign market countries.

Grete Lundbeck died in 1965, transferring her shares to the Lundbeck foundation. In 1967, the Lundbeck Foundation moved to purchase the Goldschmidt family s 49.5 percent of the company, giving it full ownership. The company continued to build up its foreign operations, setting up its U.K. subsidiary in 1972, while opening offices in New York and Paris as well. At the same time, the company continued to pursue a wide variety of research projects in both the microbiologic and CNS fields.

In 1975, however, the company reorganized, streamlining its research operations to focus on a more limited area. The company ended its microbiological research, judging its chances of developing new antibiotics as too slender. At the same time, the company began shutting down its toiletries and cosmetics division, and ended its other remaining agency operations left over from its origins as a trading company. Production of many of the companys existing products, which ranged from antibiotics to veterinary products such as cow teat salve, was maintained, however.

The company now placed all of its research efforts into developing new drugs for treating CNS disorders. Yet the long development cyclethe companys most recent marketable drug dated from the mid-1960sand extensive investments in laboratory upgrades combined to depress the companys profits through the 1980s. By 1987, with sales of nearly DKK 525 million, Lundbecks profits amounted to just DKK 2 million.

Company Perspectives:

Lundbecks long-term goal is to become a leader on the world market within the treatment of psychiatric and neurological diseases. It is Lundbecks plan to reach this goal by a combination of organic growth, inlicensing of products and strategic alliances and buy-outs.

A Better Mood for the New Century

In 1987, Lundbeck hired Erik Sprunk-Jansen as its new managing director. Sprunk-Jansen, who had previously run Greenlands Greenex mining operation, brought new life to the company. A thorough review of the companys operations brought Lundbeck to conclude that its future lay in the development of CNS drugs. The company determined to make this area its specialty and proceeded with a sell-off of its newly non-core activities, shutting down its veterinary products production. In 1991, the company sold off its antibiotics production facility to a Norwegian company for DKK 200 million.

By then, Lundbeck had launched its first new CNS drug in 20 years. The companys citalopram-based Cipramil had been launched in 1989 in Denmark before being introduced to the worldwide pharmaceutical community. A part of the family of selective serotonin reuptake inhibitors (SSRI), a class that included such competing products as Prozac, Paxil, and Zoloft, Lundbecks product was to become one of the fastest growing anti-depression drugs in the 1990sand Lundbecks core product.

In the meantime, Sprunk-Jansen led Lundbeck through a complete reorganization, trimming management, restructuring the companys organization, and revamping its research and development program. The resultswhich earned Sprunk-Jansen the moniker of Butcher from Greenlandwere a streamlined organization that, despite its relatively tiny size, was able to compete with the worlds giant pharmaceutical companies.

Cipramil rapidly gained market share throughout Europe in the early 1990s. Lundbeck then turned to the United States, the worlds single-largest market for antidepressant sales. Rather than open its own subsidiary in that country, however, Lundbeck sought to enter a distribution partnership agreement with a local company. But finding the appropriate partner proved difficult. By 1993, after three partnerships had already failed, the company decided to withdraw from the United States. Nonetheless, Cipramil enjoyed steady European success throughout the decade, helping the company achieve strong sales growth, as revenues built to more than DKK 2.3 billion, with profits of DKK 236 million for the year.

Meanwhile, the company stepped up its development of new CNS compounds. In 1998, the company readied the launch of a new drug, Serdolect, considered one of the most promising new medications for treating schizophrenia. Unfortunately for Lundbeck, the companys application for release of Serdolect in the Netherlands was denied because of concerns that the drug might increase the risk of cardiac complications in some patients. The denial effectively ended the companys chances of an immediate launch of the drug in the rest of Europe. The companys hopes of another hit medication, which Lundbeck had expected would have equaled Cipramil in sales, were dashed, at least temporarily.

The year 1998 held its share of good news for the company, however. In that year, the company was approached by the American pharmaceuticals distributor, Forrest Laboratories, which expressed its interest in taking on the marketing and distribution of Cipramil in the United States. An agreement was quickly worked out, and Lundbecks core product at last entered the United States under the brand name Celexa. The drug quickly caught on in the United States, despite stiff competition from its well-known rivals. By the turn of the century, Celexa had captured some 14 percent of the market, with no signs of slowing down. The United States soon became Lundbecks principal market, accounting for 20 percent of its sales.

By then, Cipramil/Celexa accounted for nearly 82 percent of Lundbecks sales, a troubling situtation, particularly as the company faced the loss of its patents by 2001. With the continued suspension of Serdolect, Lundbeck was forced to look forward to its product pipeline. Meanwhile, the company continued investing in its laboratory facilities. This effort was helped in part by the companys public listing in 1999, when the Lundbeck Foundation placed nearly 25 percent of the companys shares on the Copenhagen stock exchange. The share listing gave the company increased potential for making acquisitions. And, with the companys value now easily seen from its share price, it became itself a potential takeover target for the right price.

Key Dates:

Hans Lundbeck founds trading company in Copenhagen.
Edouard Goldschmidt joins Lundbeck as partner, adding medicine agencies.
Lundbeck launches the first company-developed medication, Epicutan, designed to aid in healing wounds.
The company opens first foreign subsidiary in Sweden and develops Lucosil urinary infection medication.
The company develops Neomycin and enters antibiotic production.
Grete Lundbeck founds Lundbeck Foundation.
Launch of Truxal, Lundbecks first CNS (central nervous system) medication.
Lundbeck takes full control of the company by acquiring a majority of shares from Goldschmidt family.
The company opens offices in London.
The company streamlines, ending non-medicine production.
Erik Sprunk-Jansen joins company as managing director.
The company launches Cipramil.
The company ends production of antibiotics and becomes a CNS medication specialist
Lundbeck abandons efforts to introduce Cipramil in the United States through partnerships.
The companys launch of new Serdolect anti-psychotic is suspended; U.S. distribution partnership agreement is signed with Forrest Laboratories.
Lundbeck goes public, listing nearly 25 percent of its shares on Copenhagen stock exchange.
Lundbeck makes its first acquisition, that of Italys VIS Farmaceutici Spa, and signs Cipramil distribution agreement with Japans Mitsui Pharmaceuticals.

In 2000, Lundbeck made its first acquisition, of Italys VIS Farmaceutici Spa, a producer of active substances for the pharmaceutical industry. These new operations were converted to production of Citalopram, the active ingredient of Cirpramil, which had continued to develop new markets, notably in Turkey, Central Europe, Australia, and, through a partnership agreement with Mitsui Pharmaceuticals at the end of 2000, to introduce Cipramil into the Japanese market. The companys expanded production facilities also enabled it to ready the launch of a new product, Cipralex, a second-generation citalopram-based drug. That drug, originally scheduled for launch in 2001, was instead readied for release by mid-2002. Nonetheless, the results of the companys phase III trials suggested that the drug was still more effective than its predecessor.

Lundbeck remained committed to its CNS disorder specialty as it entered the new century. The company had a promising pipeline, in part through a series of partnership agreements, such as that signed with Canadas Neurochem in 1999 to develop Alzheimers disease treatments and a partnership with Maxygen signed in 2000 to develop drugs to combat multiple sclerosis. The extent of Lundbecks recognition among its peers was seen in the variety of its partnerships, which included working with Solvay Pharmaceuticals to develop new antipsychotic medication, and another, signed in February 2001, to join with Teva Pharmaceuticals Industries to develop and market an oral formulation of Copaxone, a multiple sclerosis medication, in Europe and elsewhere. At the same time, the company continued its own development efforts, launching a medication to combat migraine headaches in 2000, and preparing several others for release in the early years of the new century. While Lundbeck remained a small company in a field dominated by multi-billion-dollar corporations, its focus on CNS medications enabled it to compete on an equal level with even the largest of its competitors.

Principal Subsidiaries

Lundbeck Australia Pty. Ltd; Lundbeck Arzneimittel Ges.m.b.H. (Austria); Lundbeck N.V. (Belgium); A/S Lundbeck Overseas (Bulgaria); Lundbeck Canada Inc; H. Lundbeck A/S (Czech Republic); H. Lundbeck A/S (Denmark); OY H. Lundbeck AB (Finland); Lundbeck S.A. (France); Lundbeck GmbH & Co (Germany); Lundbeck Hellas S.A. (Greece); Lundbeck Hungaria Kft. (Hungary); Lundbeck Pharma A/S (Iceland); Lundbeck Japan K.K.; Lundbeck B.V. (Netherlands); H. Lundbeck A/S (Norway); H. Lundbeck AB (Sweden); Lundbeck Limited (U.K.); Lundbeck Inc. (U.S.).

Principal Competitors

Pfizer Inc; GlaxoSmithKline plc; Merck & Co., Inc.; AstraZeneca PLC; Bristol-Myers Squibb Company; Novartis AG; Johnson & Johnson; Aventis Pharmaceuticals Inc.; Pharmacia Corporation; Eli Lilly and Company; Novo Nordisk A/S; CeNeS Pharmaceuticals plc; Orion; Shire Pharmaceuticals PLC; Schwarz Pharma AG.

Further Reading

Antidepressant Cheers Up Lundbeck Results, Financial Times, May 16, 2001

The History of H. Lundbeck, H. Lundbeck corporate web site, http:// www.lundbeck.com, October 2001.

H. Lundbeck Takes Control of VIS, European Report, November 8, 2000.

Jarvis, Lisa, Antidepressant Market Braces for Change, Chemical Market Reporter, August 7, 2000.

Neurochem and H. Lundbeck Announce Strategic Alliance, Pharmalicensing, November 27, 1999.

M.L. Cohen