UCB Earnings: Generic Erosion Weighs on Sales as Pipeline Candidates Continue To Develop

UCB UCB reported half-yearly revenue of EUR 2.6 billion, representing an 11% decline year over year due to generic erosion having an impact on some of the company’s drugs. We maintain our fair value estimate of EUR 99 per share and no-moat rating for UCB. The stock is currently trading in 4-star territory, about 19% below our fair value estimate. Our no-moat rating is due to ongoing generic erosion and upcoming patent losses that will weaken UCB’s intangible assets.

We forecast 2023 revenue of EUR 5.26 billion, representing about a 5% decline from 2022 due to the negative impact of patent loss exclusivity for Vimpat in the U.S. and Europe. Vimpat (for the treatment of epilepsy) is UCB’s second-largest drug and accounted for nearly 20% of total revenue in 2022.

In June, the FDA granted marketing authorization for Rystiggo (pipeline candidate: rozanolixizumab-noli) for the treatment of adults with generalized myasthenia gravis. Rystiggo is under review in Japan and Europe, and assuming it receives regulatory approval and has a successful global launch, we anticipate Rystiggo could contribute roughly EUR 900 million in sales in 2031.

We like that UCB is focused on expanding its pipeline, and approvals of additional drug indications will help further its patient reach and diversify its portfolio. Nevertheless, our long-term view of low-single-digit sales growth toward the latter half of our 10-year forecast remains unchanged as many of UCB’s drugs face patent expirations and generic competition.