Lundbeck's Appreciation Potential Is Closely Tied To A High-Risk Clinical Pipeline (Rating Upgrade)

2025-01-09 08:00:00 ET

Summary

• H. Lundbeck A/S faces significant patent cliffs and a risky pipeline, but management's expense restructuring and Longboard acquisition can drive future growth.
• The $2.5B acquisition of Longboard Pharmaceuticals adds a very  promising Phase III drug for DEEs (bexicaserin), but epilepsy drug development carries high clinical risk.
• Vyepti and Rexulti continue to perform well, and both have potential new market-expanding indications, but upcoming patent expirations create long-term revenue challenges.
• Overall, I lean positive on Lundbeck due to recent management actions and potential positive clinical read-outs, but acknowledge the high-risk nature of this investment.

These are interesting times for Denmark’s H. Lundbeck A/S ( OTCPK:HLBBF ) ( OTCPK:HLUBF ) (HLUNa.CO) (HLUNb.CO). I like what management is doing in terms of expense management and marketing prioritization, and Vyepti has been outperforming in the very competitive migraine space, but the company is facing some significant patent cliffs in the near future and the company’s pipeline is quite risky compared to your typical mid-cap pharma. If late-stage clinical trials pan out, there’s definitely upside from here, but absent those successes the company will be looking at painful sales and profit erosion....

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