Investing.com -- Shares of H. Lundbeck A/S fell over 6% on Wednesday after Deutsche Bank downgraded the stock to "hold" from "buy,” citing concerns over the company’s future growth trajectory.
The brokerage also lowered its price target from to DKK 44 DKK 53, reflecting a reassessment of Lundbeck’s valuation and strategic direction.
Deutsche Bank analyst Manos Mastorakis, who had previously been optimistic about the Danish pharmaceutical company’s investment potential, said that while the company delivered one of the strongest SMID performances in the first half of 2024, recent developments have led to a sharp reversal.
The downturn follows the company’s Capital Markets Day and its acquisition of Longboard Pharmaceuticals, which has triggered a return to valuation levels seen a year ago.
Lundbeck, which traded at approximately 7x P/E for FY24 in February, moved to 10x P/E in August but now stands at 8x P/E for FY25, effectively erasing the gains from the past year.
Mastorakis had initially based his positive outlook on several key drivers, including the long-term potential of Rexulti in treating agitation associated with Alzheimer’s disease (AADAD), the possibility of approval for its PTSD treatment, the sustained growth of its migraine drug Vyepti, and the promise of PACAP inhibitors in expanding Lundbeck’s presence in the migraine market beyond 2030.
However, while Rexulti’s trajectory remains on track and PTSD approval is still viewed positively, the PACAP pipeline, once seen as a major driver of long-term growth, no longer appears as a game-changer for the company.
With these factors in mind, Deutsche Bank now adopts a more cautious stance on Lundbeck’s ability to maintain its previous growth momentum, leading to the downgrade and revised price target.