No-Moat Lundbeck Faces Generic Competition, Yet Shares Attractive Amid Pullback; FVE DKK 42.50

Amid the recent market pullback, Lundbeck is currently trading in 4-star territory, and shares look attractive for long-term investors with a high degree of risk tolerance. Shares are trading about 33% below our fair value estimate of DKK 42.50. We believe Lundbeck merits a high uncertainty rating due to the elevated rate of failure associated with central nervous system drug development, impending patent losses, and pricing pressure from generic entry. Lundbeck’s no-moat rating is centered on generic competition continuing to erode its legacy drugs and impending patent losses over the next 10 years. Lundbeck’s stable moat trend is based on label expansions for its existing portfolio and the continued development of its pipeline, which should support the stabilization of its intangible assets.