Lundbeck to acquire Longboard for $2.6 billion

VALBY, Denmark & LA JOLLA, Calif. - H. Lundbeck A/S (Lundbeck) and Longboard Pharmaceuticals, Inc. (NASDAQ: LBPH) (Longboard) have reached an agreement under which Lundbeck will acquire Longboard, a clinical-stage biopharmaceutical company. The transaction, valued at approximately $2.6 billion in equity value and $2.5 billion net of cash, is set to enhance Lundbeck's neuro-rare disease portfolio with the addition of Longboard's lead asset, bexicaserin, currently in phase III trials.

Bexicaserin, a novel treatment targeting 5-HT2C receptors, is in development for seizures associated with Developmental and Epileptic Encephalopathies (DEEs), including Dravet syndrome and Lennox-Gastaut syndrome. The drug has received Breakthrough Therapy Designation from the U.S. FDA and is anticipated to drive growth for Lundbeck into the next decade, with a global peak sales potential estimated between $1.5 to $2 billion.

The agreement stipulates a tender offer for all outstanding shares of Longboard common stock at $60.00 per share in cash, representing a 77% premium over the 30-day volume-weighted average price as of September 30, 2024. The acquisition is expected to close in the fourth quarter of 2024, subject to customary closing conditions, including the tender of a majority of Longboard's outstanding voting shares and regulatory clearance.

Lundbeck plans to fund the acquisition through existing cash resources and bank financing, with a focus on de-leveraging to achieve a target leverage ratio within 18-24 months post-closing. The company anticipates integration costs of around $80 million, which will predominantly impact its 2024 financials, though its guidance for the year remains confirmed.

This strategic move aligns with Lundbeck's Focused Innovator strategy, aiming to build a leading position in treating rare neurological disorders. The DEEp SEA Study, part of the broader DEEp Program, is evaluating bexicaserin in a global phase III trial for Dravet syndrome, with plans to include approximately 480 participants across multiple DEE syndromes.

The information in this article is based on a press release statement.

In other recent news, Longboard Pharmaceuticals has made substantial progress in its drug development programs. The company has initiated a global Phase 3 clinical trial for bexicaserin, a drug aimed at treating seizures in Dravet syndrome patients. The U.S. Food and Drug Administration (FDA) has granted bexicaserin both Breakthrough Therapy and Orphan Drug designations, which could potentially expedite the drug's development and review process.

Longboard's drug candidate, LP659, designed for neuroinflammatory conditions, has also completed a Phase 1 trial. However, both bexicaserin and LP659 remain investigational compounds and are not yet approved for marketing by the FDA or any other regulatory authority.

In terms of analyst coverage, H.C. Wainwright has maintained a Buy rating for Longboard, increasing its price target to $80. Additionally, Baird and Truist Securities have maintained an Outperform and Buy rating respectively, both with a steady price target of $60. These ratings reflect the analysts' confidence in Longboard's growth prospects. These are the recent developments in Longboard's ongoing efforts to address the significant unmet needs in epilepsy treatment.

InvestingPro Insights

As Lundbeck prepares to acquire Longboard Pharmaceuticals, investors might benefit from a closer look at Longboard's financial metrics and recent performance. According to InvestingPro data, Longboard's market capitalization stands at $1.51 billion, significantly lower than the $2.6 billion acquisition price, suggesting a substantial premium being offered by Lundbeck.

Longboard's stock has shown remarkable performance, with a 673.36% price total return over the past year and a 545.11% return year-to-date. This impressive growth aligns with the company's potential, as recognized by Lundbeck in their acquisition decision.

InvestingPro Tips highlight that Longboard holds more cash than debt on its balance sheet and has liquid assets exceeding short-term obligations. These factors likely contributed to Lundbeck's interest, as they indicate financial stability and reduced risk in the acquisition.

However, it's worth noting that Longboard is not currently profitable, with a negative P/E ratio of -23.37 for the last twelve months as of Q2 2024. This is not unusual for clinical-stage biopharmaceutical companies, which often prioritize research and development over immediate profitability.

For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for Longboard Pharmaceuticals, providing deeper insights into the company's financial health and market position.

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