UCB Reports Pipeline Progress Amid Generic Competition

UCB UCB reported 2022 results broadly in line with our expectations, with overall revenue of EUR 5.5 billion declining about 4% from 2021 as generic competition for Vimpat has affected sales. Vimpat is UCB’s second-largest drug (accounting for over 20% of 2022 revenue), and it reported a year-over-year decline of 27% as it lost its patent exclusivity in the U.S in early 2022.

We maintain our fair value estimate of EUR 99 per share, no-moat, and negative trend ratings. The stock is currently trading at an attractive entry point for long-term investors, in 4-star territory about 18% below our fair value estimate.

We maintain our no-moat and negative trend ratings for UCB, which 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 there is enough certainty around UCB’s pipeline to offset the company’s weakening intangible assets over the next five years.

Bimzelx (bimekizumab) has been approved in the European Union, Great Britain, Canada, Japan, and Australia for the treatment of adults with moderate to severe plaque psoriasis. Regulatory review for bimekizumab by the U.S. Food and Drug Administration is ongoing, and management expects a decision in the second quarter of this year. We anticipate approval and launch in the U.S. later this year. Additionally, UCB announced positive top-line results from two Phase 3 studies evaluating the efficacy and safety of bimekizumab in adults with moderate to severe hidradenitis suppurativa, or HS. HS is a chronic, recurring, painful, and debilitating inflammatory skin disease. 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 latter half of our 10-year forecast remains unchanged, as many of UCB’s drugs face patent expirations and generic competition.