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|UCB SA |(UCBJF – OTC) |$81.75 |
Note: This report contains substantially new material. Subsequent reports will have changes highlighted.
Reason for Report: FY17 Earnings Update
Prev. Ed.: 9M17 Earnings Update
Brokers’ Recommendations: Positive: 0.0% (0 firm); Neutral: 0.0% (0); Negative: 100.0% (1) Prev. Ed.:0; 0; 1
Brokers Target Price: N/A
Note: All reference to growth rates is at constant exchange rates (CER).
Portfolio Manager Executive Summary
UCB is a biopharmaceutical company focused on the discovery and development of innovative medicines for the central nervous system (CNS) and immunology diseases. The company’s lead drugs are Neupro for the treatment of Parkinson’s disease (PD) and restless legs syndrome, Keppra and Vimpat for the treatment of epilepsy, and Cimzia for the treatment of Crohn’s disease and rheumatoid arthritis (RA).
None of the firms gave a positive rating to the stock while one firm rendered a negative rating. None of the firms were neutral on the stock.
Negative outlook (1 firm): The firm is concerned about increased R&D expense and potential acquisition costs required for sustainability of the company. Also, it is concerned about the growth of Cimzia as more biosimilars are being approved and marketed in the United States and Europe. Also, most of its candidates are still in early or mid-stages of development.
Sep 20, 2017
Overview
UCB S.A., based in Brussels, Belgium, focuses on the research, development and commercialization of innovative pharmaceutical and biotechnology products for CNS disorders, allergy/respiratory diseases, immunology and inflammatory disorders. The company is committed to secure a leading position in these severe disease categories. The company’s website is .
The firms have identified the following issues for evaluating the investment merits of UCB:
|Key Positive Arguments |Key Negative Arguments |
|UCB, through its strong franchise in epilepsy (Vimpat and Keppra), is |UCB is facing generic competition for drugs such as Keppra, Cimzia and |
|committed to hold its leadership position. Besides epilepsy drugs, the |Zyrtec. The generic version of Keppra was launched by many companies like|
|company’s strength lies in Cimzia and Neupro. Combined sales of Cimzia, |Dr. Reddy’s, Mylan and Teva Pharma. Two biosimilars of Cimzia have been |
|Vimpat, Neupro and Keppra constituted about 80% of the company’s total |approved in the United States |
|revenues in 2016. Combined peak sales from these products are expected to be | |
|at least €3.1 billion by 2020. | |
|UCB is looking to increase its presence in emerging international markets and |In a major setback, the FDA issued a CRL to the BLA for romosozumab for |
|Japan as these hold immense potential. Japan contributed 6.5% to net sales |treating osteoporosis. |
|while international markets including China contributed 19% to total sales in | |
|2017. | |
Note: The company’s financial year coincides with the calendar year. Jan 18, 2017
Long-Term Growth
The company is focused on developing treatment for severe diseases in two therapeutic areas: CNS and immunology. UCB has a strong presence in the epilepsy market led by its two drugs – Keppra and Vimpat. Moreover, the company is committed to hold its leadership position with products such as Vimpat, Cimzia and Neupro. The company expects growth to be driven by combined peak sales of at least €3.1 billion generated by key drugs like Cimzia, Vimpat and Neupro by 2020. The recent approval of Briviact should further propel the company’s top line.
Moreover, UCB is working on expanding the label of its marketed products like Cimzia and Vimpat, and strengthening its position in emerging markets and Japan. In addition, the company has several late-stage candidates in its pipeline like romosozumab, bimekizumab and seletalisib.
UCB has also been quite active on the collaboration and agreements front. In January 2015, it announced the signing of a worldwide collaboration agreement with Neuropore Therapies Inc. for the development and commercialization of candidates that will slow the progression of PD and related disorders. UCB also has an agreement with Sanofi (signed in March 2014) for the discovery and development of therapies for immune-mediated diseases including gastroenterology and arthritis. In January 2014, UCB obtained the right from Biogen Inc. to commercialize its multiple sclerosis and hemophilia products in South Korea, Hong Kong, Thailand, Singapore, Malaysia and Taiwan, and develop and commercialize products in China.
It shifted its focus toward its core areas of expertise, CNS and immunology. In September 2015, UCB inked a deal to sell its U.S. specialty generics subsidiary, Kremers Urban Pharmaceuticals to Lannett Company. The deal closed on Nov 25, 2015 for a total consideration of approximately $1.23 billion. Meanwhile, the FDA asked Kremers Urban to conduct an additional bioequivalence study on methylphenidate ER on the basis of a draft guidance in order to establish its therapeutic equivalence to its reference drug, Johnson & Johnson’s Concerta.
Target Price/Valuation
|Rating Distribution |
|Positive | 0.0% |
|Neutral | 0.0% |
|Negative |100.0% |
|Avg. Target Price |N/A |
|High |N/A |
|Low |N/A |
|No. of Analysts with Target Price/Total |N/A |
Recent Events
UCB Full Year Earnings & Sales Strong– Feb 22
UCB reported sales of €4.5 billion for the full year 2017, up 9% from the year-ago period.
The company’s revenues were driven by its immunology and neurology drugs, which accounted for almost 80% of the top line. The combined revenues of the drugs increased 13.2% from the year-ago period.
Results in Detail
Cimzia sales increased 9% to €1.4 billion, driven by continued growth in all markets.
Vimpat sales surged 19% to €976 million on expanded reach of the drug, following label expansion in children. Neupro, approved for the treatment of PD and restless legs syndrome, generated sales of €314 million, up 5% mainly driven by increased demand in the United States and Europe.
Also, sales of anti-epileptic drug, Keppra, increased 8% to €720 million driven by strong demand in the international markets, especially Japan. Briviact sales came in at €87 million, up from €18 million reported in 2016.
2018 Outlook
UCB provided its guidance for 2018. The company revenues to be in the range of €4.5 - 4.6 billion and core earnings per share to be in the range of €4.30 - 4.70 per share.
Revenue
UCB reported revenues of €4.5 billion for 2017, up 9% on a reported basis and 11% at CER, mainly driven by sales of Cimzia, Vimpat, Briviact, Keppra and Neupro.
2018 Outlook: The company increased its expectation for 2018 revenues to €4.5 – €4.6 billion on the back of continued growth in core products – Cimzia, Vimpat and Neupro.
Specific Products
Neurology
Keppra (XR) (levetiracetam)
Indication: Partial onset seizures, epilepsy myoclonic seizures, primary generalized tonic-clonic seizures (PGTCS)
Product Life Cycle Position: Marketed; generics available
Partner: Otsuka Pharmaceutical Co. Ltd.
Sales: Keppra sales for 2017 amounted to €778 million, up 8% y/y due to growth in international markets especially in Japan.
Regulatory News: In February 2016, Keppra was approved as adjunctive therapy for PGTCS.
Neupro (rotigotine)
Indication: PD; moderate-to-severe primary restless legs syndrome
Product Life Cycle Position: Marketed
Partners: Otsuka Pharmaceutical Co. Ltd. (Japan)
Sales: Neupro sales amounted to €314 million for 2017, up 5% y/y driven by increased demand in the United States and Europe.
Patent: The patent for the product expires in 2021 in both the United States and the EU.
Vimpat (lacosamide)
Indication: Partial-onset seizures; monotherapy or adjunctive therapy in patients aged 4 years or above in the United States; adjunctive therapy in patients aged 17 years or above in the EU
Product Life Cycle Position: Marketed
Partners: Daiichi Sankyo Company Limited (Japan)
Sales: Vimpat sales amounted to €976 million in 2017, up 19% y/y driven by higher demand in all the markets on expanded access in the United States and Europe.
Regulatory Status: In November 2017, the FDA approved Vimpat as an oral option for the treatment of partial-onset seizures in children four years and older. Vimpat received approval in Japan as monotherapy for partial-onset seizure in adult patients with epilepsy in August 2017. In September 2017, the drug was approved for treating epilepsy in children aged four to sixteen years in Europe.
Patent: The patent for the product expires in 2022 in both the United States and the EU.
Ongoing Studies: Vimpat is also being evaluated in a phase III study for adjunctive therapy of children suffering from partial-onset seizures related to epilepsy. Results from the study should be out in 2017.
Briviact (brivaracetam)
Indication: Monotherapy and add-on therapy for epilepsy patients aged 16 years and older suffering from partial-onset seizures.
Product Life Cycle Position: Marketed in the United States and the EU. The drug is under review for add- on therapy for epilepsy in children aged four to sixteen years
Sales: Briviact sales came in at €87 million for 2017. The drug was launched in both the United States and the EU in 1H16 and recorded sales of €18 million in 2016.
Patent: The patent for the product expires in 2026 in both the United States and the EU.
Immunology Franchise
Cimzia (certolizumab pegol)
Indications: Crohn’s disease, RA, psoriatic arthritis, axial spondyloarthritis/ankylosing spondylitis, chronic rheumatic disease in women during both pregnancy and breastfeeding
Product Life Cycle Position: Marketed
Safety Issue: Patients taking Cimzia are at an increased risk of adverse effects, including serious infections that can lead to hospitalization or even death. Given that Cimzia affects the immune system, it can lower the body's ability to fight infections such as tuberculosis and other opportunistic infections. Cimzia is a blocker of tumor necrosis factor (TNF) and may cause lymphomas (a form of cancer) and other malignancies. Although an increased risk of tumors was not seen in studies of Cimzia, the modest size and relatively short duration of the controlled studies prevent any firm conclusion. Post-marketing studies and clinical trials will be required to obtain long-term safety data.
Partners: Astellas (for RA in Japan)
UCB and Lonza have a long-term supply agreement under which Lonza manufactures Cimzia for UCB.
Sales: Cimzia sales came in at €1.4 billion for 2017, up 9% y/y, primarily driven by continuous uptake in patients living with inflammatory TNF-mediated diseases in all markets and product differentiation.
Competitors: AbbVie’s Humira and Johnson & Johnson’s Simponi
Additional Indications: Cimzia is in phase III studies for the treatment of juvenile idiopathic arthritis, psoriasis and axial spondyloarthritis; and a phase II study in Crohn’s disease.
Regulatory Update: In March 2018, the company submitted regulatory application to the Chinese Food and Drug Administration seeking approval of Cimzia to treat moderate-to-severe RA. The drug is under review in the United States and Europe for label expansion to include moderate-to-severe chronic plaque psoriasis.
Patent: The patent for the product expires in 2024 in both the United States and the EU.
Pipeline Candidates
Evenity (Romosozumab)
Indication: Postmenopausal osteoporosis (PMO) and fracture healing
Stage of development: Regulatory application under review
Partner: Amgen
Regulatory Status: In January 2018, the European Medicines Agency accepted the marketing authorization application seeking approval for treatment of osteoporosis in postmenopausal women and in men at increased risk of fracture In July 2017, the FDA had issued a complete response letter to the BLA for osteoporosis and requested efficacy and safety data from the ARCH study as well from the BRIDGE study. The requested data will be re-submitted and no new BLA is required to be filed.
Additional Data: In May 2017, UCB and Amgen announced statistically significant superior fracture risk reduction in postmenopausal women with osteoporosis than Merck’s Fosamax (alendronate), which is the current standard of care in osteoporosis. However, a cardiovascular side effect was observed in the study, following which Amgen does not expect Evenity to get FDA approval this year.
Data from the two phase III studies announced in 2016 showed that romosozumab increased bone mineral density at the lumbar spine in men and reduced the incidence of new vertebral fracture in postmenopausal women.
Bimekizumab
Indication: psoriasis, psoriatic arthritis, ankylosing spondylitis
Stage of Development: phase III
Ongoing Studies: Bimekizumab is currently being evaluated in three phase III studies evaluating bimekizumab in psoriasis, psoriatic arthritis (PsA) and ankylosing spondylitis (AS).
Additional Data: In December 2017, UCB announced data from phase IIb BE ACTIVE study, which showed that bimekizumab achieved at least 50% improvement in PsA joint symptoms in 46% of the patients against 7% of patients treated with placebo at 12weeks. Moreover, 65% of the patients treated with bimekizumab experienced at least 90% skin clearance versus 7% of patients for placebo.
In December 2017, the company announced positive data from phase IIb BE AGILE study, which showed that bimekizumab achieved at least 40% improvement in AS symptoms in almost half of the patients, compared to 13% of patients treated with placebo.
Seletalisib
Indication: primary Sjogren’s syndrome (pSS), activated PI3 kinase delta syndrome (APDS)
Stage of Development: phase IIa
Ongoing Study: In May 2016, the company initiated a phase Ib study on the candidate in APDS. Meanwhile, the company continues to evaluate the candidate in the phase IIa study in pSS. Initial results from the study are expected in third quarter of 2018.
Rozanolixizumab (UCB7665)
Indication: Immune thrombocytopenia (ITP), moderate to severe Myasthenia Gravis
Ongoing Studies: In March 2018, UCB initiated phase IIa study in patients with moderate-to-severe Myasthenia Gravis, with data expected in 2H18. In December 2017, the company announced positive proof of concept data from a phase II study on UCB7665 in patients with ITP and continued study for higher doses..
Seletalisib
Indication: drug-resistant epilepsy
Stage of Development: phase IIb
Ongoing Study: In February 2018, the company initiated a phase IIb study on the candidate with drug-resistant epilepsy. Results from the study are expected in the first half of 2020.
Alliances, Agreements and Collaborations
On Apr 4, 2017, UCB announced that it has entered into multi-year therapeutics discovery collaboration with Q-State Biosciences to develop novel therapeutics for epilepsy and particularly, genetically defined subtypes of childhood epilepsy.
Margins
Gross profit amounted to €3.33 billion in 2017, up 13% due to strong sales of key drugs and improved product mix.
Marketing and selling expenses were €940 million, up 2% y/y. Research and development expenses were €1.1 billion, up 5% y/y, while general and administrative expenses were €192 million, up 5% y/y at CER.
Earnings per Share
The company reported core earnings of €4.82 per share in 2017, up 51% year over year.
2018 Outlook
UCB now expects core earnings in the band of €4.30 - €4.70 per share due to an expected increase in operating expense.
| |Indrajit Bandyopadhyay |
|Analyst | |
|Copy Editor |Debasmita Banerjee |
|Content Editor |Ekta Bagri |
|Lead Analyst |Ekta Bagri |
|QCA |Kinjel Shah |
|Last Updated By |Ekta Bagri |
|Reason for Update |FY17 Revenue Update |
DISCLOSURE
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
DISCLOSURE
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
DISCLOSURE
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
DISCLOSURE
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
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Apr 19, 2018
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