UCB: Pipeline Makes Progress Amid Pressure From Generics; EUR 99 Fair Value Estimate Maintained

UCB UCB remains focused on expanding its addressable patient population and developing its pipeline as the company continues to face generic competition. UCB received positive opinions from the European Medicines Agency for two additional indications of Bimzelx (bimekizumab) for the treatment of adults with active axial spondyloarthritis and for adults with active psoriatic arthritis based on data from phase 3 studies. If approved by the European Commission, these would represent the second and third indications for bimekizumab in the EU, following its initial approval for the treatment of moderate to severe plaque psoriasis in 2021. We forecast Bimzelx could contribute about EUR 1.5 billion in revenue globally in 2027.

We maintain our fair value estimate of EUR 99 per share, no-moat, and negative moat trend ratings for UCB. The stock is currently trading at an attractive entry point for long-term investors about 15% below our fair value estimate. Our no-moat and negative moat trend ratings are due to ongoing generic erosion and upcoming patent losses that will have a negative impact on UCB’s portfolio. Further, we don’t think UCB’s pipeline supports enough certainty to offset the company’s weakening intangible assets over the next five years.

We forecast 2023 revenue of nearly EUR 5.2 billion, representing a nearly 6% 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.

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 declining sales growth toward the end of our 10-year forecast remains unchanged as many of UCB’s drugs face pressure from patent expirations and generic competition.