BUY OR SELL-Lundbeck investors torn between patents & pipeline

* Anti-depressant patent expiry key for stock’s prospects

* Bearish analyst sees $1 billion revenue loss by 2015

* Obama health care reform could dent Danish firm’s revenue

* “Buy” proponents confident in Lundbeck’s drugs pipeline

By Peter Starck

COPENHAGEN, March 8 (BestGrowthStock) – The fate of patents for
blockbuster antidepressant Cipralex, sold in the United States
as Lexapro, and a pipeline of new drugs will determine Danish
drugmaker Lundbeck’s (LUN.CO: ) prospects in coming years.

Lundbeck shares have been flat over the past 12 months,
mainly due to fears that the expiry of its anti-depressant
patents will undermine revenue and earnings. The STOXX 600
Europe healthcare index (.SX4P: ) has risen 65 percent in the same

One of two Copenhagen pharma bluechips — the other is
diabetes care products maker Novo Nordisk (NOVOb.CO: ) — Lundbeck
is valued at 7.8 times estimated 2010 earnings based on the
latest Reuters poll of analysts, or a 50 percent discount to
European healthcare peers. [ID:nLDE62303F]


That, however, ought not to be sufficient reason for
investors to buy the stock, according to Credit Suisse, which
reiterated its “underperform” recommendation after Lundbeck’s
quarterly results last week. [ID:nLDE6230E5]

“Spearheaded by the loss of the… antidepressant franchise,
Lundbeck faces over 6 billion Danish crowns ($1.1 billion) in
revenues lost to patent expiries between now and 2015,” Credit
Suisse said in a note.

Lan & Spar Bank said: “The investment case is not

“Group earnings will change dramatically with the expiry of
Cipralex/Lexapro patents in 2012 and 2014 although it remains
unclear exactly how and how much,” Lan & Spar said.

Lan & Spar also pointed to U.S. President Barack Obama’s
planned healthcare reform, which it said could affect one-fifth
of Lundbeck’s U.S. revenue. [ID:nN04157938] [ID:nHEALTH]

Further weighing on the stock: “In some markets in Europe
… Cipralex is experiencing generic competition and this trend
will strengthen in coming years,” Lan & Spar said.


S&P Equity Research reiterated its “buy” recommendation
after the latest quarterly report, citing a positive pipeline
update for an antidepressant candidate which it is developing
with Japanese partner Takeda Pharmaceuticals (4502.T: ).

“Other pipeline updates are also positive,” S&P analyst
Jakob Thrane said in a note.

Denmark’s Jyske Bank said the Lundbeck stock was
fundamentally undervalued.

“If Lundbeck, as we expect, manage to defend its Lexapro
patent and its most important Cipralex patents, we are convinced
that these products will generate good growth until the patents
expire in 2012/2014,” said Jyske Bank, which rates Lundbeck

Its discounted cashflow model translates into fair value of
107 Danish crowns per Lundbeck share while a relative valuation
suggests 112 crowns.

Lundbeck’s shares traded up 0.3 percent at 97.65 crowns at
0850 GMT.

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(Editing by Sharon Lindores)
($1=5.479 Danish Crown)

BUY OR SELL-Lundbeck investors torn between patents & pipeline