UCB transformed from a hybrid pharma firm into a pure-play biopharmaceutical company

Business Strategy & Outlook

UCB emerged as a major biopharmaceutical player in the 1990s with the development of blockbuster drugs Zyrtec and Keppra. Throughout the 1990s and early 2000s, UCB transformed from a hybrid pharma/chemical firm into a pure-play biopharmaceutical company by shedding its packaging, film, and chemical businesses. Acquisitions of Celltech (2004) and Schwarz Pharma (2006) strengthened the biopharmaceutical pipeline, bringing in late-stage assets that would eventually be approved as Cimzia (immunology), Vimpat (epilepsy), and Neupro (Parkinson’s disease). These key products helped offset the impact of Zyrtec and Keppra patent losses, and the company has continued to shape its expertise in immunology and central nervous system disorders.

UCB’s current portfolio faces key patent losses over the next 10 years, but successful pipeline development could help the firm fill the gaps. Among UCB’s central nervous system therapies, the epilepsy drugs Vimpat and Briviact to be strong contributors until key patent expirations in 2022 and 2026, respectively. In immunology, the steady growth for Cimzia until its 2024 patent loss. Through UCB’s acquisition of Zogenix, it gained Fintepla, an oral solution for patients suffering from Dravet Syndrome and Lennox-Gastaut Syndrome, two severe forms of epilepsy. UCB received approval in the EU and Great Britain in August 2021 for Bimzelx, a drug targeting IL-17A and IL-17F for the treatment of moderate to severe plaque psoriasis. It has subsequently received approval in Japan, Canada, and Australia. It could reach the U.S. market by 2024. The immunology landscape is fairly crowded, but Bimzelx could carve out a slice of the market. The potential for label expansions into psoriatic arthritis and other immunology indications. Additionally, UCB has two other later-stage candidates in complement-mediated disorders, with rozanolixizumab and zilucoplan (through the Ra Pharma acquisition announced in 2019). The complement-mediated disorders landscape is also somewhat crowded, with many competitors vying to displace Alexion’s (since acquired by AstraZeneca) dominant position.

Financial Strengths

The UCB is in good financial health, with solid earnings and cash flow generation. UCB has deleveraged over the years, and it ended 2021 with about EUR 860 million in net debt on its balance sheet. Year-end cash and equivalents totaled nearly EUR 1.3 billion. The firm has historically relied on acquisitions to fill gaps left by patent losses and in late 2019 agreed to acquire Ra Pharmaceuticals for about EUR 2 billion, net of cash acquired. The large purchase was mostly financed with new debt, but one cannot have any concerns about the company meeting its financial obligations. In early 2022, UCB acquired Zogenix for EUR 1.7 billion. This acquisition is financed through a combination of cash and a new term loan. The acquisition of Zogenix brought Fintepla into UCB’s portfolio. Fintepla is an FDA-approved oral solution for patients suffering from Dravet Syndrome and Lennox-Gastaut Syndrome, two severe forms of epilepsy. This acquisition will be earnings accretive from 2023 onwards.

Bulls Say

The immunology market presents a massive market opportunity for Cimzia and newer drug Bimzelx.
UCB has taken steps to build out the pipeline in attractive therapeutic areas, such as complement mediated disorders.
UCB should be able to leverage its commercial expertise to sell pipeline candidate bimekizumab, approved as Bimzelx outside the U.S. and on track for U.S. approval in 2024.

Company Description

UCB is a Belgium-based biopharma firm focused on the development of novel therapies for the treatment of central nervous system and immunologic diseases. Historically, revenue was derived from allergy medicine Zyrtec and epilepsy drug Keppra, which have both lost patent protection. The firm’s key products are Cimzia (immunology), Vimpat (epilepsy), Neupro (Parkinson’s disease and restless leg syndrome), Briviact (epilepsy), Bimzelx (psoriasis), Evenity (osteoporosis), Nayzilam (cluster seizures), and Fintepla (Dravet Syndrome and Lennox-Gastaut Syndrome).

(Source: Morningstar)

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