Lundbeck Downgraded to 'Sell' by Deutsche Bank on Mounting Rexulti Headwinds

Deutsche Bank has downgraded pharmaceutical company Lundbeck to 'Sell' from 'Hold' and reduced its price target, citing a challenging outlook for its key drug franchise, Rexulti, which accounts for approximately 25% of the company's total revenue.

Rexulti Faces Triple Threat

In a note to clients, Deutsche Bank analyst Niall Alexander highlighted three major pressures expected to weigh on Rexulti's performance. The bank now forecasts a low single-digit compound annual sales decline for Lundbeck from 2026 through 2030.

The primary headwinds identified are:

• Increased Competition: Growing market presence of rival treatment Auvelity.
• U.S. Price Cuts: An anticipated price reduction in 2028 under the Inflation Reduction Act (IRA), impacting the roughly 35% of U.S. Rexulti sales exposed to Medicare.
• Patent Cliff: The loss of patent protection for the drug in 2029.

Revised Valuation and Outlook

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Reflecting these concerns, Deutsche Bank lowered its price target on Lundbeck shares to DKK 36 from DKK 40. The new target implies a potential 18% downside from the stock's last closing price of DKK 44.66.

The bank's valuation is based on a fiscal 2027 price-to-earnings multiple of 6x, which represents a steep 66% discount to the European small- and mid-cap pharmaceutical peer average. According to the note, this discount is justified by the near-term patent cliff, elevated merger-and-acquisition risk, and the forecast for declining revenue.

Pipeline and Market Context

While Deutsche Bank raised its estimates for Lundbeck's late-stage pipeline assets, it stated these were not sufficient to offset the projected value erosion from Rexulti. The downgrade's timing was also influenced by the upcoming fourth-quarter Phase 3 data readout for bexicaserin, an epilepsy treatment.

The downgrade follows Lundbeck's first-half 2026 results, which showed a deceleration in underlying revenue growth. Separately, the company’s controlling shareholder, Lundbeckfond Invest A/S, launched a voluntary share exchange offer, which directly increases the market supply of the company's B-shares.