Competition in Rheumatoid Arthritis Market Weighs on UCB Earnings

Belgian drug firm UCB today presented its financial results for 2011, with overall revenues inching up 1% to EUR3.2 billion (USD4.2 billion) and overall earnings before interest, tax, depreciation and amortisation (EBITDA) declining 7% to EUR683 million. Earnings were primarily hit by a substantive increase in research and development (R&D) spend, which is currently accounting for around a quarter of net sales and grew by 11% in 2011 in light of increased investment in its pipeline assets. Revenue growth reflects the ongoing transition from UCB's older assets in allergy, epilepsy and ulcer treatment towards more high-value innovative compounds such as Cimzia (certolizumab).

Still, Cimzia results came slightly below expectations due to the intense competition in the rheumatoid arthritis market, particularly in North America, were sales were up 36% to EUR226 million. Sales in the more nascent European market for Cimzia were up 160%. Sales of Keppra (levetiracetam) were relatively stable due to erosion of sales in North America where it is facing post-patent competition (sales down 18%). A similar story was told for Xyzal (levocetirizine), where generic competition is hitting its profile in Europe.

Outlook and Implications

UCB announced that it is expecting revenues of around EUR3.1 billion for 2012, a slight decline, with recurring EBITDA at around EUR630-600 million. Although UCB is seeking to curtail its R&D spend as a percentage of its overall sales (from 24% to 22-23%), the company's longer-term outlook will be driven by further clinical development of Cimzia and Vimpat, Phase III assets epratuzumab in lupus and brivaracetam in epilepsy, as well as its sclerostin antibody CDP-7851/AMG-785, which has had positive Phase II results. Brivaracetam results as an adjunctive therapy in partial onset seizures in adults with epilepsy are expected in the first half of 2013, and epratuzumab results in systemic lupus erythematosus are expected in the first half of 2014.

With a unique mechanism of action, CDP-7851 is being positioned in the competitive post-menopausal osteoporosis market, and UCB is expecting to commence Phase III trials in 2012. Amgen and UCB are also collaborating in a series of other bone-related indications for the drug. Elsewhere, UCB is expected to announce Phase II results for anti-IL6 (olokizumab) in rheumatoid arthritis in Q3 2012.