27.07.2020 – 07:10
UCB Half Year Report 2020
- UCB's resilient product portfolio drives continued company growth
- Revenue increased to EUR 2.6 billion and net sales to EUR 2.5 billion, both +12%, +9% CER or +10% at CER and adjusted for divestitures respectively - Underlying profitability (adj. EBITDA) was EUR 783 million (+8%, 0% CER) or a ratio of 30% - Ra Pharma acquisition closed early April, Engage Therapeutics acquired in June, co-promotion agreement for Cimzia® with Ferring in July - R&D update: bimekizumab in psoriasis with positive Phase 3b results; padsevonil in drug-resistant focal epilepsy terminated; Phase 3 with dapirolizumab pegol in SLE to start - Financial outlook for 2020 confirmed: Revenue expected to reach EUR 5.05 - 5.15 billion, adjusted EBITDA should reach 26 - 27% of revenue, Core EPS of EUR 4.40 - 4.80 expected
Core product net sales
Revenue for the first six months of 2020 increased to EUR 2.6 billion and net sales went up to EUR 2.5 billion, both +12%, +9% CER or +10% at CER and adjusted for divestitures respectively and driven by the continued growth of UCB's core products.
Underlying profitability (adjusted EBITDA) reached EUR 783 million (+8%; +0% CER) reflecting continued top line growth and the investments into the future of UCB, namely into product launches and product development.
Driven by "other expenses" Profit of the Group was to EUR 388 million of which EUR 363 million (-12%; -6%% CER) were attributable to UCB shareholders.
Core earnings per share were EUR 2.77 after EUR 2.42.
"Our good business performance so far is also linked to our ability to support our partners in society during COVID-19. We were able to continue serving our patients and taking the best possible care of our people during the crisis," said Jean-Christophe Tellier, CEO UCB "and with UCB scientific expertise and experience we are joining forces on global response to COVID-19. We are concerned about the impact of the pandemic on our communities and have set up local financial support and the global UCB Community Health Fund."
Acquisitions and Agreements
April 2020 - Closing of Ra Pharma acquisition - the acquisition of Ra Pharmaceuticals, Inc. has been successfully completed and Ra Pharma is now a wholly-owned subsidiary of UCB. This acquisition should enhance UCB's leadership potential in myasthenia gravis by adding zilucoplan, a peptide inhibitor of complement component 5 (C5) currently in Phase 3, to the UCB pipeline alongside to UCB's rozanolixizumab, an FcRn targeting antibody also in Phase 3. Zilucoplan is a novel investigational molecule also being evaluated in other complement-mediated diseases including amyotrophic lateral sclerosis (ALS) and immune-mediated necrotizing myopathy (IMNM).
June 2020 - UCB acquires Engage Therapeutics, a clinical-stage pharmaceutical company developing Staccato® Alprazolam for the rapid termination of an active epileptic seizure. Staccato® Alprazolam is an investigational drug (Phase 2b) designed to be used as a single-use epileptic seizure rescue therapy that combines the Staccato® delivery technology with alprazolam, a benzodiazepine.
July 2020 - UCB and Ferring Pharmaceuticals Inc. have entered into a co-promotionagreement to commercialize the prefilled syringe formulation of Cimzia® (certolizumab pegol) in the United States for the treatment of Crohn's disease (CD). UCB will continue to be responsible for all product-related activities, including revenue recognition. UCB will continue to promote and to commercialize the lyophilized formulation of Cimzia® for all indications as well as the prefilled syringe formulation for the rheumatology and dermatology indications.
In March, the evolving COVID-19 pandemic led UCB to pause new patient recruitment into ongoing clinical studies and to postpone all new study starts. This has led to some delays of UCB's clinical studies. As from end-May 2020, UCB began to restart clinical study recruitment, including new study starts, at clinical trials sites that meet the restart criteria. The latest timelines for UCB's clinical development programs are shown below. UCB will continue to monitor the impact of COVID-19 on all ongoing clinical trials and will implement changes as necessary.
In January 2020, Cimzia® (certolizumab pegol) was approved by the Japanese health authorities for the treatment plaque psoriasis, psoriatic arthritis, pustular psoriasis and psoriatic erythroderma for which existing treatment methods are not sufficiently effective. The approval makes Cimzia® the first Fc-free, PEGylated anti-TNF treatment option now available for these patients in Japan.
During the first quarter 2020, Vimpat® (lacosamide) for the adjunctive treatment of primary generalized tonic-clonic seizures (PGTCS) in study participants 4 years of age and older was filed with the U.S., EU and Japanese regulatory agencies.
In March, UCB reported that the Phase 2b study with padsevonil in drug-resistant focal epilepsy patients did not reach statistical significance for either of the primary endpoints. Padsevonil was generally well-tolerated and its safety profile was consistent with that seen in earlier studies. Further analysis of the data led UCB to the decision to terminate the padsevonil program as it did not offer sufficient benefit for people living with epilepsy over existing anti-epileptic treatment options.
In July, the Phase 3b study BE RADIANT, comparing bimekizumab to secukinumab for the treatment of adults with moderate-to-severe plaque psoriasis, met all primary and ranked secondary endpoints, achieving significantly greater efficacy than secukinumab.
In Q3, UCB and its partner Biogen will include the first patients into the Phase 3 program with dapirolizumab pegol in patients with active systemic lupus erythematosus (SLE) despite standard-of-care treatment. First headline results are expected in H1 2024.
Net sales break-down by core product
Cimzia®(certolizumab pegol) for patients living with autoimmune and inflammatory TNF mediated diseases, net sales went up to EUR 842 million, driven by new indication launches in the U.S. and product launches in international markets. In Europe, Cimzia® is holding up well in an enlarging market.
Vimpat®(lacosamide), with net sales of EUR 722 million, shows continued strong double-digit growth in all regions reaching more and more people living with epilepsy.
Keppra®(levetiracetam) for epilepsy, reported net sales of EUR 419 million, driven mainly by international markets/Japan. In the U.S., net sales reflect generic competition while in Europe net sales recovered from a local one-time rebate adjustment in HY 2019, now reaching the level of HY 2018 again.
Briviact®(brivaracetam), reached net sales of EUR 144 million. This is driven by strong, double-digit growth in all regions where Briviact® is available to patients.
Neupro®(rotigotine), the patch for Parkinson's disease, reached net sales of EUR 156 million, almost stable in a competitive market environment. International markets impacted by order patterns for Japan.
In December 2019, UCB launched Nayzilam®(midazolam) Nasal SprayCIV, the first and only nasal rescue treatment for epilepsy seizure clusters in the U.S. Net sales in the first six months 2020 were EUR 11 million.
Evenity®(romosozumab) for the treatment of severe osteoporosis in postmenopausal women at high risk of fracture had its first European launch in March 2020 and reported net sales of EUR 1 million.
HY 2020 financial highlights
Revenue and net sales in the first six months of 2020 reached EUR 2 608 million and EUR 2 491 million, both +12%, +9% CERor +10% at CER and adjusted for divestitures respectively. Net sales before "designated hedging reclassified to net sales" (- EUR 51 million in H1 2019 / - EUR 9 million in HY 2020) were up by 10% (+9% CER). This growth was driven by the continued positive and resilient performance of UCB's product portfolio. Royalty income and fees increased to EUR 38 million from EUR 33 million. Other revenue increased to EUR 79 million from EUR 71 million.
Gross profit increased to EUR 1 925 million in-line with topline growth and reflecting a stable gross margin of 74%.
Operating expenses reached EUR 1 311 million (+14%; +13% CER) driven by
- 13% higher marketing and selling expenses of EUR 569 million - due to launches and prelaunch activities: Cimzia® in non-radiographic axial spondyloarthritis in the U.S. and the launches in China and Japan, Nayzilam® in the U.S., Evenity® in Europe as well as launch preparations for bimekizumab for the treatment of psoriasis; - 21% higher research and development expenses of EUR 689 million which include the first time R&D expenses for the Ra Pharma development program, the termination costs (EUR 38 million) in connection with the termination of the project padsevonil in focal onset seizures as well as high investments in UCB's progressing clinical pipeline encompassing five late stage assets. The R&D ratio reached 26% in the first six months of 2020 after 24% in HY 2020. - 2% lower general and administrative expenses of EUR 94 million, also reflecting lower costs due to COVID-19 pandemic and including a donation of EUR 3 million in connection with COVID-19 pandemic. - other operating income of EUR 41 million driven by the collaboration with Amgen for the commercialization of Evenity®.
This resulted in a stable operating expense ratio (in relation to revenue) of 50%.
Underlying profitability - adjusted (recurring) EBITDA reached EUR 783 million after EUR 724 million (+8%; +0% CER) driven by continued revenue growth and increased operating expenses, reflecting the investments into the future of UCB, namely into product launches and clinical development. The adjusted (recurring) EBITDA ratio for the first six months of 2020 (in % of revenue) reached 30%, after 31% in 2019. In compliance with the ESMA Alternative Performance Measures guidelines, "recurring EBITDA" is renamed into "adjusted EBITDA". The calculation methodology remains unchanged.
Other expenses were EUR 95 million - due to restructuring expenses and fees related to the acquisition of Ra Pharma and Engage Therapeutics - after an income of EUR 27 million in 2019.
Net financial expenses increased to EUR 61 million from EUR 53 million, due to the debt financing of the Ra Pharma acquisition.
Income taxexpenses were EUR 70 million compared to EUR 108 million in June 2019. The average effective tax rate was 15% compared to 20% in the same period of last year, but in line with the 2019 full year effective tax rate.
Driven by "other expenses" Profit of the Group amounted to EUR 388 million (after EUR 437 million), of which EUR 363 million is attributable to UCB shareholders and EUR 25 million (after EUR 26 million) to non-controlling interests.
Core earnings per share, which reflect profit attributable to UCB shareholders, adjusted for the after-tax impact of one-time expenses, the financial one-offs, the after-tax contribution from discontinued operations and the net amortization of intangibles linked to sales, reached EUR 2.77 based on 189 million weighted average shares outstanding after EUR 2.42 based on 187 million weighted average shares outstanding.
Outlook 2020 confirmed - UCB confirms its expectations for 2020 revenue to reach approximately EUR 5.05 - 5.15 billion, adjusted (recurring) EBITDA in the range of 26 - 27% of revenue and core earnings per share are therefore expected in the range of EUR 4.40 - 4.80 based on an average of 188 million shares outstanding.Based on UCB's current assessment of the Covid-19 pandemic, UCB remains confident in the fundamental underlying demand for its products and its prospects for long-term growth. UCB will continue to closely follow evolving COVID-19 pandemic diligently to assess potential near- and mid-term challenges.
CFO transition in 2020 - on July 1st, UCB welcomed Sandrine Dufour as Executive Vice President and Chief Financial Officer. Sandrine is now a member of UCB's Executive Committee reporting to Jean-Christophe Tellier, UCB's CEO and Chairman of the Executive Committee. Sandrine Dufour is a senior executive with a proven track record and deep financial expertise that stems from more than 25 years leading with successful national and global organizations. From 2015 to recently she held the role of CFO at Proximus, Belgium's largest telecommunication company.
Today, UCB will host a conference call/video webcast at 08.00 (EDT) / 13.00 (BST) 14.00 (CEST).
Details are available on https://www.ucb.com/investors/UCB-financials/Half-year-financial-results.
UCB, Brussels, Belgium (www.ucb.com) is a global biopharmaceutical company focused on the discovery and development of innovative medicines and solutions to transform the lives of people living with severe diseases of the immune system or of the central nervous system. With more than 7 500 people in approximately 40 countries, the company generated revenue of EUR 4.9 billion in 2019. UCB is listed on Euronext Brussels (symbol: UCB). Follow us on Twitter: @UCB_news
Forward looking statements UCB
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Moreover, sales may be impacted by international and domestic trends toward managed care and health care cost containment and the reimbursement policies imposed by third-party payers as well as legislation affecting biopharmaceutical pricing and reimbursement.
The updated financial guidance above does not reflect any potential impacts from the evolving COVID-19 pandemic. The company is following the development diligently to assess the financial significance of this pandemic to UCB.