Lundbeck is still searching for a final way around a looming patent gap for several of the pharmaceutical company’s best-selling products, but acquisitions can help pave the way, according to Danske Bank, which resumes its coverage of the share with a neutral recommendation of ’hold’ and a price target of DKK 36 (USD 5).

However, Lundbeck has plenty to work with in terms of further acquisitions after some good years of clear growth in its four key strategic products.

”History shows that Lundbeck has long faced structural challenges - with no proprietary products approved since Brintellix in 2013. We believe the acquisition history since 2011 has been solid,” Danske Bank writes in an analysis note.

Plenty of ammunition for acquisitions

However, the bank believes there is plenty of ammunition in stock for more acquisitions to help Lundbeck progress. Both with and without utilizing the new share structure that was formally approved last summer.

”We estimate up to DKK 24bn in potential capacity with a net debt of four times EBITDA without new shares. With the A and B shares, we calculate that Lundbeck can raise approximately DKK 34bn in new shares while the Lundbeck Foundation retains control,” Danske Bank writes.

”We believe Lundbeck is primarily targeting near-to-market projects as it needs commercial or late-stage assets to make up for patent expiries on key products that are in the pipeline,” the bank continues.

Danske Bank estimates that if both options are combined, an additional DKK 2.7bn could be added to the long-term valuation if Lundbeck’s historical return rate for acquisitions is taken into account.

The two major patent expiries to hit Lundbeck in the coming years are Brintellix in 2027 and Rexulti in 2029, and especially the latter could hurt the Danish pharmaceutical company, according to Danske Bank.

”The search for growth engines continues while the patent gap looms - with a moderate impact from the expiry of Brintellix in 2027 and probably a more significant sales dip in 2029 due to the expiry of Rexulti,” Danske Bank writes.

(Translated using DeepL with additional editing by Kristoffer Grønbæk)