Lundbeck's M&A Flexibility May Be Its Greatest Asset Today

The core business of Denmark's H. Lundbeck (OTCPK:HLUYY) (LUN.KO) is more or less an "is what it is" situation; while there is still some potential upside from the company's newer portfolio of drugs, potential market-expanding studies won't read out for years. Where the upside likely lies today is in the company's M&A strategy, as the company has deployable capital of over $4 billion that could meaningfully change the outlook for the company in the mid-term and beyond.

With the exception of certain serial acquirers, I almost never factor M&A into a company's valuation, and Lundbeck is no exception. That said, it's unwise to ignore it outright. Lundbeck shares look a little undervalued as is, and it seems like sentiment is still weighted toward the bearish view that Lundbeck will pursue dilutive, value-destroying deals. To the extent that Lundbeck management can deliver a good transaction or two, then, there could be a greater upside than what would otherwise be in the business as is.

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Lundbeck's M&A Flexibility May Be Its Greatest Asset Today