A common investor error is to buy cheap shares assuming a recovery in value is inevitable. That path often leads to traps. What investors should instead ask is what corporate actions are needed to turn a company around, and what this could mean for profits. Those are the questions we need to answer when looking at Denmark’s second best-known pharmaceutical company, Lundbeck (DK:LUN). It is fair to say that Lundbeck lives in the shadow of its wildly successful stablemate Novo Nordisk (DK:NOVO), which is currently printing money selling diabetes and obesity drugs to overweight Americans.
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Lundbeck, by contrast, is more traditional in its pharmaceutical orientation, with a product niche in central nervous system (CNS) drugs in hard-to-treat conditions such as Alzheimer’s disease and depression. The investment case for Lundbeck currently rests on the fact that it is the pharmaceutical company in Europe that looks to be the most receptive to sustained corporate action to turn its fortunes around, opening the path to profit for investors.