Letter to the stakeholders
Dear shareholders, partners, colleagues and those living with severe diseases,
UCB’s ambition is to be the patient preferred biotech leader, creating value for millions of patients whilst delivering sustainable company growth as well as sustainable shareholder value.
Our strategy requires innovation, focus and agility and therefore an evolution to an integrated business model with ‘biotech characteristics’, impacting each part of our value chain. Our operating model from patient to science, from science to solution and from solution to patient is based on understanding the patient needs to deliver compelling value propositions.
We, at UCB, are progressively implementing our Patient Value Strategy. In an environment of pressured healthcare budgets, increasing involvement of patients in their own healthcare and the potential of scientific and technological innovation overall healthcare will shift towards recognition of true differentiation, outcome orientation and value generation.
‘We deliver highly differentiated solutions to specific populations, striving for a unique experience for each patient.’
Jean-Christophe Tellier, CEO
Our Patient Value Strategy is going beyond price-cost discussion, reflecting a shift from volume orientation to patient value creation and striving for long-term sustainable patient value outcomes.
To achieve these goals:
- We integrate patient insights and focus on patient value at every step in our value chain, from research to commercialization;
- We focus on specific patient populations within our current therapeutic areas: immunology, neurology and bone;
- We build up our scientific capabilities and networks to enhance our competitive innovation strengths;
- We progress innovative assets outside our core focus via partnerships, to create new royalty income flow in the mid-term – we call this ‘biotech characteristics’ of our strategy. Examples in the past are royalties for an overactive bladder treatment. In the future this might by a royalty stream from CMC544, a new potential cancer treatment from our research and currently under regulatory review;
- We continue to nurture and foster our patient value culture to ensure strategy execution.
We are progressing on our growth path with our three strategic phases:
1. Today, we are in the grow & prepare phase:
- We continue to grow positive momentum on Cimzia®, Vimpat®, Neupro® and the newly launched Briviact®;
- We carefully prepare the launch Evenity™ (romosozumab) for people living with osteoporosis;
- We carry on broadening our early pipeline.
2. The accelerate & expand phase will follow
- We accelerate uptake of Briviact® and Evenity™ while maximizing the potential of Cimzia®, Vimpat® and Neupro®;
- We invest in R&D and emphasize the innovation focus.
- We enhance our financial and strategic flexibility and realize income from assets outside our core focus.
3. During the breakthrough & lead phase
- We compensate the loss of exclusivity for Cimzia®, Vimpat® and Neupro® by continuing growth from Briviact® and Evenity™
- We successfully launch breakthrough products and accelerate growth.
Our recent performance confirms our ambition. UCB continues to deliver above industry growth, with financials that enable UCB to become the patient preferred biotech leader with a healthy balance between short-term profitability and long-term sustainable growth.
In 2016 – and as part of the Grow and Prepare Phase, we reached continuous growth of 20% for Cimzia®, Vimpat® and Neupro® to € 2.4 billion net sales – or better: touching the lives of 823 000 patients living with severe neurological and immunological disorders, 31% more since the start of the Growth Phase two years ago. This also reflected further expansion of our offered solutions for patients with Vimpat® in Japan, Cimzia® by the AutoClicks® prefilled pen in the EU, and the launch of Briviact® for 13 000 patients living with epilepsy in Europe and North America.
With our partner Amgen, we saw scientific presentations of the positive results from the Phase 3 program with Evenity™ for the treatment of osteoporosis and filing with the U.S. and Japanese authorities. Together, we prepare to bring Evenity™ to people living with osteoporosis at high risk of fracture.
Our current early clinical pipeline is the broadest in company history: comprising 10 different new molecular entities. We have assets focusing on specific patients within immunology and neurology, as well as innovative assets outside our core focus with the potential for partnerships.
In 2016, we generated an 8% growth of revenue to € 4.2 billion, thereof € 3.9 billion of net sales, an increase of 10%. This growth was driven by products in our core focus in neurology and immunology. Our underlying profitability – recurring EBITDA* – improved to € 1.0 billion, a growth of 26% and representing a ratio to revenue of 25% after 21% in 2015. The net profit attributable to the UCB shareholders amounted to € 520 million, reflected also in core earnings per share of € 3.19. We are statisfied that we reached our financial targets for 2016. We also outperformed our recurring EBITDA* to net debt ratio target of 1:1 – two years earlier than expected. The Board of Directors proposes a gross dividend of € 1.15 per share after € 1.10 per share in 2015 – reflecting the continuous improvement of the earnings base.
2017 is another “Grow and Prepare” year and we will not only continue our growth path towards our peaks sales target of at least € 3.1 billion combined net sales for Cimzia®, Vimpat® and Neupro® by 2020. We will also, with our partner, prepare and – subject to regulatory approval – launch Evenity™ in the U.S. towards the end of 2017, and later for Japan and the EU.
Supported by the growth of Cimzia®, Vimpat® and Neupro®, the continued launch of Briviact® and the substantial Keppra® franchise, we aim to reach revenue in the range of € 4.25-4.35 billion in 2017. While tracking towards our aim of a 30% recurring EBITDA* ratio in 2018, we aim for a recurring EBITDA for 2017 in the range of € 1.15-1.20 billion, reflecting core earnings of € 3.70-4.00 per share.
To all of our employees, the Board of Directors, shareholders, partners, colleagues and those living with severe diseases: many thanks for your continuous support, your encouragement, your creative challenges and inspiration.
2016 was a year we will all remember: the world around us has seen tremendous change. We witnessed natural disasters, terrorist attacks, the rise of populism and question marks over the future of the European Union – leading to less stability and more uncertainty. It is thus no surprise, that changes in the healthcare systems around the world have accelerated and pressure has increased. These external changes are reflected in our strategy. We continue to implement the cultural and organizational change in our company to ensure we are fit for the future, with highly differentiated medicines that provide sustainable value to patients and stakeholders, including shareholders. With the Patient Value Strategy we will enable us to master those challenges. We still have a long way to go while we have made significant progress throughout the year – thank you for continuing our journey with us.
Chief Executive Officer
* EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization charge