Thursday, September 22, 2016

Lundbeck Fails In Alzheimers

A little while ago, H. Lundbeck (LUN.KO) (HLUYY) put out a press release stating that its 5-HT6 receptor antagonist idalopirdine failed its first Phase III study (STARSHINE) in Alzheimer's, due to a "weak efficacy profile". While there are still two other Phase III studies underway, that's a pretty damning description from management, and I'd be shocked if either remaining study delivers meaningfully positive results.

This was always a high-risk, low-probability crap-shoot. While Lundbeck does do a very good job of creating/engineering drugs that are better than their class peers (generally by controlling how much they impact various receptors), the whole 5-HT6 class looks like a lost cause at this point.

The news came out after the close in Lundbeck's home market, but the ADRs were down about 12% last I looked. I had zero revenue from this program in my model, so it doesn't change my fair value at all, but clearly there were investors factoring in some option-like upside from the program.

It's too bad that yet another Alzheimer's drug candidate failed, but Lundbeck will be fine. They have another, very early-stage Alzheimer's program (a vaccine approach), but Lu AF357000 for schizophrenia is really the valuable part of the pipeline today.

Please note that I own shares of Lundbeck as of this writing

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