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UCB Sees Earnings Declining Up to 20% on Lower Revenue

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March 2 (Bloomberg) -- UCB SA, the maker of the Cimzia arthritis drug, forecast earnings will drop as much as 20 percent this year as the epilepsy medicine Keppra faces generic competition in Europe and drug development costs increase.

Per-share profit excluding special items will drop to 1.65 euros ($2.27), plus or minus 5 cents, from 1.99 euros, the Brussels-based company said today in a statement. Profit last year beat the 1.81-euro average estimate of 21 analysts surveyed by Bloomberg. Revenue will decline to about 3.05 billion euros from 3.22 billion euros last year.

UCB’s top-selling medicine Keppra lost patent protection at the end of September in the European Union, where sales of the epilepsy drug climbed 11 percent to 606 million euros last year. The emergence of lower-priced copies may offset the anticipated increase in revenue for Cimzia, Vimpat and Neupro, which had combined 2010 sales of 413 million euros. UCB is also facing increasing development costs as late-stage trials of the epilepsy drug brivaracetam and the lupus medicine epratuzumab started in December.

“Generic competition to Keppra will be the key factor and we expect management will need to guide cautiously, in case generic launch is imminent,” Mark Purcell and Brian Bourdot, analysts at Barclays Capital in London, wrote in a preview note. They had estimated 2010 per-share profit of 1.91 euros and have an “underweight” rating on the shares.

Operating Expenses

Earnings before interest, tax, depreciation, amortization and one-time items may drop to 665 million euros, plus or minus 15 million euros, from 731 million euros last year, UCB said. That compares with analyst projections of 681 million euros for 2011, the average of 20 analyst estimates compiled by Bloomberg.

Operating expenses rose 4 percent to 1.7 billion euros last year and net financial expenditure increased 14 percent to 185 million euros. Special items included a $8.6 million fine as well as a $25.8 million settlement, excluding accrued interest, following an agreement in principle with the U.S. Justice Department about an investigation into the marketing of Keppra six years ago.

UCB declined 0.3 percent to 26.86 euros at the 5:35 p.m. close of trading on Euronext Brussels yesterday. The shares have gained 4.6 percent since the start of the year, compared with a 0.5 percent advance for the 34-company Stoxx 600 Health Care Index in the period.

To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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