LEO Pharma has been in the midst of a shakeup since the beginning of 2022. After naming a new CEO and announcing a major restructuring, the Danish dermatology pharma has let a considerable number of employees go, closed research centres and restructured its R&D team. While LEO’s financials look promising thanks to these cutbacks and the launch of its atopic dermatitis med tralokinumab, the company is still in the throes of a major overhaul as allegations of unethical conduct loom in the UK.
The new operating model … will make a much more simple, agile and efficient LEO Pharma and this is the best way forward for us to ensure a sustainable business model for the future
Former Chief Financial Officer and Acting CEO Anders Kronborg
New CEO and Restructure
Last January LEO geared up for a major revamp, naming ex-Orphazyme and Amgen exec Christophe Bourdon as its new CEO just after announcing the introduction of a new operating model aimed at increasing the firm’s competitiveness while supporting its future growth.
According to LEO, the restructure would be the next phase of its already-underway transformative strategy that would take it to an initial public offering within the next four or five years. “We are at a defining moment in our transformation journey – and in the history of our company,” said then Chief Financial Officer and Acting CEO Anders Kronborg.
The reorganisation included initiatives to optimise operations and drive efficiency and has entailed a large number of layoffs as well as the shutdown of some of LEO’s open innovation, regenerative medicine and science and tech hubs in Asia and Boston. “The new operating model we announce today will make a much more simple, agile and efficient LEO Pharma and this is the best way forward for us to ensure sustainable business model for the future,” said Kronborg at the time.
R&D Leadership Shift
Thus far, the dermatology firm has gone from 6,000 employees in 2022 to some 4,700, but the organisational shakeup has not ended there. After announcing in early 2023 that it would shift its R&D to a research model while beefing up its pipeline with externally sourced innovation, LEO split its R&D organisation in two and brought a new scientific leader onboard.
University of Copenhagen professor Jacob Pontoppidan Thyssen became the EVP and chief scientific officer and the long-standing VP of research and early development Thorsten Thormann left the company after almost two decades. “This change is about ensuring coherence and focus from early to late-stage across the pipeline. We remain committed to the full development cycle and to a close collaboration between Research and Development,” Bourdon commented at the time.
A Major Launch and Promising Financials
Together with our owners and banks, we have now secured a capital structure that supports the future growth both organically and through acquisitions
Philip Eickhoff, CFO
The reorg bore its fruits and brought LEO’s operational costs down by 11 percent, and in the first half of the year’s results, the company reported the13 percent growth of its dermatology portfolio, driven largely by the moderate-to-severe atopic dermatitis drug Adtralza/Adbry (tralokinumab). The med, originally acquired from AstraZeneca in 2016 for USD 115 million, gained FDA approval in 2021 and to date has been launched in 15 markets.
Based on these results, the firm readjusted its outlook for 2023, expecting an 8-10 percent revenue growth as compared to the previously communicated guidance of 6-10 percent.
To support further growth, LEO is looking to bolster M&A efforts and with its second quarter financials, the dermatology drugmaker announced a new capital structure, including a cash injection of around DKK 750 million, it said would provide a total financial capacity of over DKK 4 billion to pursue business development and M&A opportunities.
“We are pleased with the solid progress made during first half. We are following the plan and we are delivering on our commitments. Together with our owners and banks, we have now secured a capital structure that supports the future growth both organically and through acquisitions,” CFO Philip Eickhoff maintained.
Bringing Late-Stage Assets Onboard
Signing an agreement to acquire Timber Pharmaceuticals … is an additional step in delivering on our strategy
Christophe Bourdon, CEO
One such acquisition was the recent agreement with Timber Pharmaceuticals for USD 36 million. The US-based clinical-stage firm develops and markets therapies to treat rare and orphan dermatologic conditions and through the acquisition LEO will strengthen its pipeline by gaining rights to its late-stage candidate TMB-001.
Aimed at treating congenital ichthyosis, a rare skin disease that has no approved prescription therapies, TMB-001 has received orphan and breakthrough designation from the FDA with a decision on approval expected by 2025.
“Signing an agreement to acquire Timber Pharmaceuticals and TMB-001 … is an additional step in delivering on our strategy,” Bourdon asserted.
Troubling Allegations
While LEO looks to be getting itself back on track, challenges remain. The firm has been caught up in a case with the Prescription Medicines Code of Practice Authority (PMCPA), a self-regulatory body that administers the UK pharma lobby group the Association of the British Pharmaceutical Industry (ABPI) Code of Practice, over allegations from an employee of coercion and “unethical behaviour.”
The LEO staffer in question filed a complaint claiming that the company was attempting to unethically gain a competitive advantage for its plaque psoriasis drug, Kyntheum, after a senior manager allegedly pressured the employee to obtain confidential discount price information about a competitor’s product from the National Health Service (NHS) for its own commercial interests.
As a result, LEO was found to be in breach of the ABPI Code of Practice. Despite an appeal from LEO, the PMPCA upheld the breach, most seriously with respect to Clause 2, for “bringing discredit upon, and reducing confidence in, the pharmaceutical industry.”
