Lundbeck Declines as SEB Sees Generic Threat: Copenhagen Mover

H. Lundbeck A/S, the Nordic region’s second-largest drugmaker, fell the most in six weeks in Copenhagen trading after SEB AB said generic drug producers pose a bigger threat to earnings than most investors estimate.

Lundbeck fell as much as 3.4 percent, the most since Aug. 23, which made the stock today’s biggest decliner in the OMX Copenhagen 20 index. The shares lost 2.2 percent to 116.90 kroner at 11:42 a.m., with trading volume at 121 percent of the three-month daily average.

Lundbeck is working to bring new drugs to the market to make up for lost revenue as patents on its medicines, including bestselling anti-depressant Lexapro, expire. SEB today cut its recommendation on the share to sell from buy and said patent expirations aren’t fully accounted for in the stock price.

“The pace of generic entrants seems underappreciated by the market and we expect significant estimate revisions,” Peter Hugreffe, a Copenhagen-based analyst at SEB, said in a note. This is “best illustrated” by the market’s profit estimates for next year compared with Lundbeck’s own forecast, he said.

The average estimate for Lundbeck’s 2014 earnings before interest and tax is 1.11 billion kroner ($200 million), according to a survey of 15 analysts conducted by Bloomberg. Copenhagen-based Lundbeck has said it expects 2014 Ebit of 500 million kroner to 1 billion kroner.

Lundbeck’s profits will suffer from slower-than-expected introductions of new products Abilify Maintena, Selincro and possible also Brintellix, Hugreffe said.

In addition, a “sharper-than-expected downturn on key products, and the massive cost consumption associated with key product launches are all factors working against Lundbeck,” the analyst said. He cut a price estimate on the share to 110 kroner from 122 kroner previously.

Lundbeck is due to publish third-quarter earnings on Nov. 6. The drug producer may report Ebit of 181 million kroner, according to a survey of seven analysts.

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