Morningstar | Lundbeck's Lu AF35700 Fails to Deliver in Schizophrenia but No Material FVE Impact Expected
We do not anticipate a material change to our fair value estimate for Lundbeck following poor results for Lu AF35700 in phase 3 trials for schizophrenia. While the drug had shown antipsychotic effects and a favorable safety profile, Lundbeck announced that the candidate did not show statistically significant superiority compared to conventional therapy (risperidone or olanzapine). Given the high complexity of mental disorders, we had weighed the therapy with a 50% chance of approval. Removing this opportunity from Lundbeck's pipeline had a muted impact on the company's valuation (less than 2%), given the diverse portfolio of marketed central nervous system therapies and intellectual property that underpins Lundbeck's narrow economic moat. The shares plunged 25% on Oct. 25 following the news, bringing them down from previous lofty levels and closer to our fair value estimate.H. Lundbeck develops, produces and markets drugs for treating diseases of the central nervous system. Products include antidepressants for the treatment of depression, panic disorder, and prevention of relapse/recurrence. Antipsychotic products for psychotic disorders; schizophrenia, anxiety, restlessness and insomnia; treatment of psychotic disorders; acute psychotic episodes, exacerbation of psychotic disorders. Co.'s products inclue Cipralex®/Lexapro® for the treatment of depression and anxiety; Ebixa® for the treatment of Alzheimer's disease; Azilect® for the treatment of Parkinson's disease; Xenazine®, Sabril®, Saphris® Sycrest®, Onfi, and other.
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