Lundbeck Benefits From Covid-19 Stocking, But The Pipeline Is Still Problematic

Drug companies have been relative safe havens during this global Covid-19 outbreak, doing about 10% better than the S&P 500 since the beginning of the year, and H. Lundbeck (OTCPK:HLUYY) (LUN.CO) has more or less performed in line with the industry. First quarter results saw a boost from stocking orders that management couldn’t (or wouldn’t) quantify, but it also saw markedly lower spending that boosted reported results. All told, I’d call it “business as usual” albeit with the caveat that those stocking orders will likely depress results at some point down the line.

The biggest concern around Lundbeck remains its weak pipeline; an issue that even management acknowledges as a problem. Even if management’s efforts to restructure and improve the internal R&D efforts bear fruit, the results won’t be seen for a while, leaving the company likely needing to do more deals to backfill the pipeline – a dicey proposition given recent clinical failures of acquired assets. While these shares do appear priced for a respectable return (in the high single-digits), I’d call that fair compensation for the risks involved.

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Lundbeck Benefits From Covid-19 Stocking, But The Pipeline Is Still Problematic