UCB - KBC Securities Company Note 13.12.2018: Fighting the sharkfin with late stage clinical pipeline

We increase our target price from € 75 per share to € 84 per share and maintain our Buy rating based on a rapidly moving late-stage clinical pipeline complementing the key products in the different franchises.
• Key products are facing exclusivity loss in the coming 5 years. UCB – like other commercial pharma – is facing patent cliffs on its key products Cimzia (US/EU 2024), Vimpat (US/EU 2022) and Keppra (2020 in Japan). Erosion of the sales need to be compensated in the coming years through strategic positioning of the drugs in additional markets or for additional indications. UCB is addressing this threat by making Cimzia available for women at childbearing age and distribution of the drug in China. On Vimpat we expect more phase III results for use of the drug as adjunctive treatment in Primary Generalized Tonic-Clonic Seizures (GTCS).
• Pipeline drugs find their way to the late clinical development stage. In 2018, UCB managed to accelerate late stage drugs on three fronts. Evenity and Midazolam regulatory ruling is foreseen in 2019, Padsevonil is currently tested in a pivotal phase IIb and Bimekizumab in multiple phase III studies.
• Target price of € 84 per share and Buy rating. Following our DCF analysis, we increase our target price (6-month) to € 84 per share coming from € 75 per share (Buy) based on the recent accelerations in late-stage pipeline developments complementing the existing footprint in epilepsy, expansion of the inflammation franchise with strategic positioning of new drugs as well as good hopes on regulatory approval for the bone drug Evenity (in collaboration with Amgen).