Rheumatoid Arthritis Slip-Up Unlikely To Affect Resurgent UCB Shares

| About: UCB S.A. (UCBJY)

For most companies the prospect of temporarily mothballing your fourth most-valuable product in development would spell share price disaster, but the decision to call a halt on independent development for the phase II MAb olokizumab barely registered for UCB (OTCPK:UCBJY). Shares in the group were flat at €43.47 in afternoon trading.

What appears to be making UCB bulletproof for the time being is that the Brussels-based company, unlike many of its European peers, is set to emerge from its patent expiry cliff by the end of the year; add to this what many analysts see as strong growth prospects for a trio of its newer products and UCB can afford to have this developmental hiccup.


Slamming on the brakes for olokizumab is an eminently sensible move. Topline results for the drug involving 220 patients who had previously failed on anti-TNF treatments showed little difference between it and Actemra, the current incumbent in this hard-to-treat space.

Without any superiority benefits over a drug that is heading towards blockbuster status and the FDA’s increasingly toughening stance on ‘me too’ products UCB would have struggled to carve out any significant sales on its own. As such, the company is proposing that any further development of olokizumab will have to be done with a partner.

The move by UCB represents an increasingly pragmatic stance by companies of killing off or diverting resources from either clinically or commercially weak products. What this could mean is that olokizumab ends up on the shelf if a partner is not forthcoming.

Pipeline strength

But if analysts are correct UCB has little to worry about in terms of topline growth. With the key patent expiry of Keppra behind it, growth over the next 10 years is expected to be sustained by the strong performance of Cimzia, the epilepsy drug Vimpat and Parkinson’s drug Neupro, all of which have patent protection beyond 2020.

Cimzia is expected to report compounded annual growth of 19% between 2011 and 2018, with sales reaching $1.47bn by 2018, while Vimpat, another refractory product for those not well served by other drugs, is expected to have sales of $1.27bn and growth of 23% in the same period. The smaller of the three drugs, Neupro, approved for treating the signs and symptoms of Parkinson’s disease and restless leg syndrome, is set to grow by 18%, according to EvaluatePharma.

The prospect of these stable and not inconsiderable growth rates has helped to push up UCB’s share price by 34% since the beginning of the year.

Next catalysts

But there could be clouds on the horizon: Pfizer’s (NYSE:PFE) tofacitinib will find out by November 21 if it will get US approval, and if it does it will be competing in the same space of refractory patients who do not respond well to Enbrel or Humira. Currently 2018 sales forecasts for tofacitinib are running at $1.72bn.

Observers will also be waiting for the detailed results of UCB’s biggest pipeline hope, the osteoporosis drug AMG 785. Phase II fracture data in partnership with Amgen (NASDAQ:AMGN) are due to be presented at the American Society for Bone and Mineral Research in mid-October and have already been earmarked for interest after UCB previously stated that they compared well with the other bone-builders, Fosamax and Forteo (Amgen and UCB push forward with bone-building antibody, April 4, 2012).

Positive results here should help to determine the real potential of AMG 785 in this new market, but as launch is not expected until 2016 the product remains a risky prospect. If the results are not as strong as expected there could be read-through to the larger osteoporosis indication, and UCB’s hitherto strong shares could suffer.

Disclosure: None

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