Generic Competition Plagues UCB and Solvay in H1 as Growth from New Drugs is Slow to Materialise

Belgian drug-makers UCB and Solvay Pharmaceuticals have published their financial results for the first half of 2009, revealing challenging times faced by the country’s two biggest pharma players. At UCB, first-half sales fell by 10.2% year-on-year (y/y) to 1.4 billion euro (US$2 billion), plagued by generic competition to top brands. On the upside, UCB also saw a 35% y/y rise to 114 million euro in royalties, thanks to Pfizer’s (U.S.) launch of Toviaz (fesoterodine) in the United States in early June. Progress in the SHAPE restructuring programme was seen through cutbacks in spending on R&D, and general and administrative expenses, but IHS Global Insight nevertheless calculated a 9.3% y/y drop in operating profit for UCB, to 536 million euro.

Over at Solvay, the Pharmaceuticals unit was alone out of the company’s three divisions to record a gain in sales during the first half, rising 3.4% y/y to 1.3 billion euro. Turnover from Solvay Pharmaceuticals made up more than 31% of Solvay’s group sales over the period. Although Solvay has not released any figures on operational costs for the Pharmaceuticals division, the group as a whole, which also includes the Plastics, Chemicals, and Corporate and Business Support divisions, saw a 16.7% y/y decline in production and labour costs and a 1.4% y/y downturn in spending on R&D. However, losses from the Plastics division were damaging to the group’s bottom line and operating income slumped by nearly 30% y/y to 353 million euro as a result. Solvay has calculated that its Pharmaceuticals division’s recurring earnings before interest, tax, depreciation and amortisation (REBITDA) fell by 12% y/y to 261 million euro.

For UCB, the first half of 2009 saw some important market launches for its newest drugs, which should breathe new life into its ageing product portfolio. Key among these were the U.S. roll-outs of rheumatoid arthritis treatment Cimzia (certolizumab pegol) and epilepsy drug Vimpat (lacosamide), as well as the European return of Parkinson’s disease drug Neupro (rotigotine transdermal patch) and the European Union (EU) market debut of Vimpat. Cimzia was also recommended for EU approval in rheumatoid arthritis in late June; full European approval is expected by the end of the year (see Belgium: 30 June 2009: UCB Gains Backing for Cimzia in RA and Relaunches Neupro in EU, Sues Synthon over Xyzal ANDA).

Turning to UCB’s more established drugs, the sales picture during January-June was mostly negative. Double-digit losses were felt in the turnover of epilepsy drug Keppra (levetiracetam) following its genericisation in the United States, causing a 22% y/y drop to 465 million euro. UCB blamed a less severe pollen season in most European countries for the 21% y/y contraction in allergy drug Xyzal’s first-half sales, but this did not include an extra US$92 million in U.S. turnover (compared with 19 million euro in the first half of 2008) generated by Xyzal marketing partner Sanofi-Aventis (France). Interestingly, UCB’s older allergy drug Zyrtec (cetirizine) saw its sales jump 28% y/y despite having fallen off patent in most major markets and being loss making since 2007. UCB says this is the result of launching a paediatric version and new formulations of Zyrtec in Japan, as well as a severe local pollen season.

Heavy losses were also felt in sales of cough treatment Tussionex (chlorpheniramine and hydrocodone) and Neupro, which spent most of the first half remaining conspicuously absent from pharmacy shelves in both the EU and the United States after being withdrawn over storage concerns last year. Although Neupro was relaunched in Europe in late June, it has yet to be reintroduced to the U.S. market.

Solvay Pharmaceuticals’ portfolio was equally dominated by loss-making drugs, with only a few treatments continuing to grow their market share. The best-performing segment remained Men’s and Women’s Health, which saw a 27% y/y rise to 371 million euro in sales. Testosterone deficiency treatment Androgel (testosterone gel) grew the fastest, up by 44% y/y at 214 million euro. However, Androgel has seen several obstacles thrown in its path recently: a black-box warning was imposed on testosterone gels sold in the United States in May, while Israeli generics producer Perrigo submitted an Abbreviated New Drug Application with a Paragraph IV certification to the FDA in June, seeking approval for its copy version of the drug while claiming that Androgel’s U.S. patent is no longer valid (see Belgium: 15 June 2009: Solvay Faces First Post-FTC Challenge to Androgel Patent as Perrigo Files ANDA and Belgium: 11 May 2009: Solvay Hit by FDA Black-Box Warning on Testosterone Gels).

Elsewhere, Parkinson’s disease drug Duodopa (levodopa/carbidopa) saw a 40% y/y leap to 27 million euro, while Solvay’s flagship Fenofibrate franchise of cardiovascular drugs suffered a 2% y/y downturn in sales. Solvay says that this is not fully representative of first-half Fenofibrate sales, as it excludes 39 million euro in sales of Trilipix (fenofibrate) made to U.S. distributors in December 2008, immediately after its approval by the FDA. U.S. drug giant Abbott, which co-markets TriCor (fenofibrate) and Trilipix with Solvay, saw its U.S. first-half sales of the two drugs gain 6% y/y to stand at US$588 million.

Pancreatic enzyme Creon (pancrelipase) saw an impressive 19% y/y rise to 123 million euro in its first-half sales and can be expected to witness more growth in the second half and beyond, following its approval in the United States in mid-April.

Outlook and Implications

UCB has confirmed its full-year outlook for revenue of 3.1-3.3 billion euro, compared with 3.6 billion euro in 2008. Full-year REBITDA is predicted to be higher than 680 million, while net profit should reach 550 million euro. Neupro’s return to the EU market and its likely relaunch in the United States in the short-to-medium term will combine with sales of Cimzia and Vimpat to counter losses from older products, although it will take time for these new drugs to develop a strong enough market presence to reverse UCB’s sales losses altogether. An EU recommendation in July for a paediatric formulation of Keppra, meanwhile, should help to grow new sales for the drug and extend its market exclusivity in Europe.