Friday, December 16, 2016

UCB: Lower standards in Belgium

The last two posts on this blog detail how - for all practical purposes - UCB (the large Belgian pharmaceutical company) has lost the patent to one of its main drugs (Vimpat) and not told the market. See here and here

EBIT is likely to fall 30-40 percent eventually. The company might dain one day to fill shareholders in on the details. The numbers are really not pretty but without proper company disclosure it is impossible to make an accurate estimate. 

For almost two weeks I have expected the UCB to make a statement. But they have kept silent failing to disclose key information to the market.

The patent's death certificate was only sent by the United States Patent and Trademark office last Monday and there are different time-zones and languages to deal with. So I drafted the blog-posts gently, expecting a confirming press release along with accurate statement of prognosis from the company.

The patents death certificate is however almost certainly final. This is a clear statement of fact by the Patent Office against the patent. Appeals against patents are almost always on matters of law - and courts are reluctant to overturn fact-finders. All previous actions against this patent have been on law. A finding of fact against UCB is devastating. 

This is not ordinary course of business patent litigation. In the ordinary course of business UCB has wound up in patent disputes with other companies (eg Mylan, Argentum). And those disputes have been where the assumption is that UCB has a valid patent.

This time it is in dispute with the US Government. And the US Government is stating there is no valid patent. 

Ask other European companies how disputes with the US Government pan out.

Moreover the burden of proof has changed. UCB now has to get its patent approved under de-novo standards when the Patent Office has already rejected the patent. 

Of course none of this seems to warrant any statement from UCB.

Lower standards

I am going to be blunt. Withholding a piece of information this significant from the market in the US would result in a fairly nasty SEC inquiry complete with subpoenas to determine who knew what and when. I have made relatively few investments in Belgium so I can't tell whether the Belgian regulatory standards are lower or the standards are just lower at UCB.

But standards are very low here.

In the US if a single insider has sold whilst in possession of this information (which was unreleased to the market) they could expect close investigation by Preet Bharara. I don't know what standards apply in Belgium.

As stated in previous postsI found the IR officers we met of very high integrity. But this has to extend higher than this. I think it has to rise to the level of Jean-Christophe Tellier - the well regarded CEO.

The Jean-Christophe Tellier was described in the press release announcing his appointment as playing "a key role in driving the growth of UCB’s three core medicines, Cimzia®, Vimpat® and Neupro®."

Presumably he knows that his strategy surrounding those drugs is dead. Presumably he is part of withholding that information from the market.

In the US his days as CEO would be numbered.

I can only presume that standards are lower in Belgium. But if UCB claims to have high standards Mr Tellier should be fired.



David said...

Hi John,

According to the Belgian Association of Financial Analysts UCB has one of the highest standards.

Next time you're around, It would be my pleasure to offer you a beer.

admin said...

Aren't you short?

zembla said...

Not to be a nitpicker but I think you meant "deign" instead of "dain".

Unknown said...

Suggests they are brushing it off, and expect it to be in the courts for years.

Unknown said...

If Im correct they are regulated by the The Financial Services and Markets Authority (FSMA).

I wrote them a letter and will provide feedback if I receive any.

According to the FSMA they require compliance with very high standards.

Unknown said...

If Im correct they are regulated by The Financial Services and Markets Authority (FSMA). I wrote them a letter and will post the reply if I receive any.

Unknown said...

Hi John,

I wrote to the FSMA. Here is their response below : Seems as if their interpretation of the Patent office document is that it does not impact the patent. I think they are mistaken.

Reply from FSMA copied below :


29 December 2016
our reference

COC 20161229 - 5051

Dear mister Lishman,

UCB has publically reacted to this document (see text below). UCB has confirmed that this news does not qualify as “inside information”, so no further consequences are to be foreseen.

(BFW) UCB Says It Will Respond to Non-Final Rejection of Vimpat


UCB Says It Will Respond to Non-Final Rejection of Vimpat Patent
2016-12-09 16:27:30.259 GMT

By Susan Decker
(Bloomberg) -- “As part of its normal reexamination
proceedings which started in June 2016, the US Patent Office
issued its first communication (called a non-final Office
Action) in relation to the Vimpat patent,” company said in

* “This is standard practice and UCB will have its first
opportunity to respond”
* “UCB’s position with regard to the validity of the Vimpat
patent remains unchanged”
* Earlier: UCB Falls After U.S. Patent Office Ruling Regarding

We hope that this information is useful to you.

Yours sincerely,
FSMA Consumer Contact

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.