Lundbeck Achieves Solid Growth in Q3; Maintaining FVE DKK 42.50; Shares Undervalued

We maintain our Lundbeck fair value estimate of DKK 42.50 per share, and we view the stock as undervalued, currently trading in 4-star territory. We believe Lundbeck merits a High Uncertainty Rating due to the elevated rate of failure associated with central nervous system drug development, upcoming 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. We think Lundbeck’s strategic brands will help stabilize the negative impact of generic competition on the firm’s older drugs that have reached their patent expirations.