1.3 Revenue and recurring EBITDA

1.3.1 Net sales by product

Total net sales in 2018 increased to € 4 412 million, 5% higher than last year or +8% CER.

 

 

 

 

 

 

Actual

Variance

€ million

2018

2017

Actual rates

CER

Immunology

 

 

 

 

Cimzia®

1 446

1 424

2%

5%

Neurology

 

 

 

 

Vimpat®

1 099

976

13%

17%

Keppra® (including Keppra® XR/E Keppra®)

790

778

2%

5%

Neupro®

321

314

2%

4%

Briviact®

142

87

63%

70%

Established brands

 

 

 

 

Zyrtec® (including Zyrtec-D/Cirrus®)

101

103

-2%

2%

Xyzal®

90

104

-14%

-11%

Other products

323

368

-12%

-9%

Net sales before hedging

4 312

4 154

4%

8%

Designated hedges reclassified to net sales

100

28

>100%

 

Total net sales

4 412

4 182

5%

8%

 

 

 

 

 

Core products

Cimzia® (certolizumab pegol) for patients living with inflammatory TNF mediated diseases, net sales increased in a competitive market environment to € 1 446 million (+2%; +5% CER), driven by newly launched indications.

Vimpat® (lacosamide) net sales went up to € 1 099 million (+13%; +17% CER) marking a new blockbuster for UCB and showing strong, double-digit growth in all regions where Vimpat® is available to people living with epilepsy.

Keppra® (levetiracetam), also for epilepsy, had net sales of € 790 million (+2%; +5% CER). Mainly driven by the growth in international markets, namely Japan where growth was +13% (+16% CER) reaching € 154 million.

Briviact® (brivaracetam) available for people living with epilepsy since 2016, reached net sales of € 142 million after € 87 million in 2017, a plus of 63% (+70% CER).

UCB’s epilepsy franchise reached net sales of € 2 031 million, a plus of 10%.

Neupro® (rotigotine), the patch for Parkinson’s disease reached net sales of € 321 million (+2%; +4% CER), still growing in Europe and the U.S., having reached its peak sales in 2018.

Established brands

Zyrtec® (cetirizine, including Zyrtec®-D/Cirrus®) for people living with allergy, had net sales of € 101 million (-2%; +2% CER).

Xyzal® (levocetirizine), also for allergy, net sales declined to € 90 million (-14%; -11% CER), mainly in international markets due to generic competition.

Other products: Net sales for other established brands decreased by 12% (-9% CER) to € 323 million mainly due to the divestiture of “Innere Medizin”. Adjusted for divested and discontinued non-core products, other established brands decreased by 7%.

Designated hedges reclassified to net sales were positive with € 100 million (after € 28 million in 2017) reflecting UCB’s realized transactional hedging activities which have to be recognized in the “net sales” line according to IFRS. These are mainly related to the U.S. Dollar.

1.3.2 Net sales by geographical area

 

 

 

 

 

 

 

 

Actual

Variance actual rates

Variance CER

€ million

2018

2017

€ million

%

€ million

%

Net sales U.S.

2 158

2 069

90

4%

192

9%

Cimzia®

896

918

-21

-2%

21

2%

Vimpat®

822

746

76

10%

115

15%

Keppra®

221

232

-11

-5%

0

0%

Briviact®

109

63

45

72%

51

80%

Neupro®

101

96

5

5%

9

10%

Established brands

 

 

 

 

 

 

Other

9

14

-5

-34%

-4

-31%

Net sales Europe

1 325

1 288

37

3%

42

3%

Cimzia®

400

370

29

8%

31

8%

Keppra®

216

235

-18

-8%

-18

-8%

Vimpat®

206

177

29

16%

30

17%

Neupro®

174

168

6

3%

6

4%

Briviact®

29

22

7

32%

7

33%

Established brands

 

 

 

 

 

 

Zyrtec®

55

52

4

7%

4

7%

Xyzal®

27

29

-1

-5%

-1

-5%

Other

218

235

-18

-7%

-17

-7%

Net sales international markets

829

798

31

4%

83

10%

Keppra® (including E Keppra®)

352

311

41

13%

59

19%

Cimzia®

150

136

13

10%

25

19%

Vimpat®

70

53

17

33%

22

42%

Neupro®

46

50

-3

-7%

-2

-4%

Briviact®

4

1

2

>100%

3

>100%

Established brands

 

 

 

 

 

 

Xyzal®

63

75

-13

-17%

-10

-13%

Zyrtec® (including Cirrus®)

46

51

-5

-10%

-1

-2%

Other

98

120

-22

-19%

-13

-10%

Net sales before hedging

4 312

4 154

158

4%

317

8%

Designated hedges reclassified to net sales

100

28

72

>100%

 

 

Total net sales

4 412

4 182

230

5%

330

8%

 

 

 

 

 

 

 

U.S. net sales reported by UCB were up to € 2 158 million (+4%; +9% CER); driven by the core products. Cimzia® net sales decreased by 2% at real rates and increased by 2% at constant rates reaching € 896 million. Vimpat® went up by 10% (+15% CER) to € 822 million. The Keppra® franchise went down to € 221 million (-5%; 0% CER), facing generic competition since 2008, and Briviact® reached € 109 million net sales; +72%; +80% CER. Neupro® net sales were up to € 101 million (+5%).

Europe net sales were € 1 325 million (+3%; +3% CER), driven by the continued sustainable performance of the core products: Cimzia® (€ 400 million; +8%), Vimpat® (€ 206 million; +16%), Keppra® (€ 216 million; -8%) and Briviact® (€ 29 million; +32%) which was launched in 2016 as well as Neupro® (€ 174 million; +3%). The established brands declined, mainly due to mandatory price reductions and generic competition. Adjusted by the divestiture of “Innere Medizin”, Europe net sales were up by 4%.

International markets net sales – including Japan and China being the largest net sales contributors, amounted to € 829 million (+4%; +10% CER) driven by sustainable growth of the core products. Thereof, net sales in Japan were up 5% to € 305 million driven by sustainable in-market demand. In Japan, Cimzia® net sales were stable at of € 34 million, Vimpat® reported net sales of € 22 million, E Keppra® had a net sales growth to € 154 million (+13%) and Neupro® reached net sales of € 31 million. Net sales in China were € 151 million.

Designated hedges reclassified for sales were positive with € 100 million (after € 28 million in 2017) reflecting UCB’s realized transactional hedging activities which have to be recognized in the “net sales” line according to IFRS.

1.3.3 Royalty income and fees

 

 

 

 

 

 

Actual

Variance

€ million

2018

2017

Actual rates

CER

Biotechnology IP

56

59

-4%

0%

Zyrtec® U.S.

12

26

-56%

-53%

Toviaz®

19

19

1%

6%

Other

5

4

25%

27%

Royalty income and fees

92

108

-15%

-11%

 

 

 

 

 

During 2018, royalty income and fees decreased to € 92 million (-15%).

Royalties collected for Zyrtec® were driven by the lifecycle of that product.

Royalties collected for Toviaz® were stable. The franchise royalties paid by Pfizer for the overactive bladder treatment reflect the in-market performance of the franchise.

1.3.4 Other revenue

 

 

 

 

 

 

Actual

Variance

€ million

2018

2017

Actual rates

CER

Contract manufacturing sales

83

91

-9%

-8%

Xyzal® in U.S.

0

56

-100%

-100%

Partnerships in Japan

8

30

-75%

-75%

Product profit sharing

11

16

-32%

-32%

Other

26

47

-44%

-43%

Other revenue

128

240

-47%

-46%

 

 

 

 

 

Other revenue reached € 128 million (-47%) compared to € 240 million in 2017 that was impacted by the one-time other revenue of € 56 million for out-licensing of the over-the counter-allergy drug Xyzal® in the U.S. Adjusted for this one-time other revenue in 2017, the decrease of other revenue was 30%.

Contract manufacturing sales decreased to € 83 million from € 91 million, contract manufacturing for the 2016 divested established brands is no longer included.

Partnering activities in Japan encompass the collaboration with Otsuka focusing on E Keppra® and Neupro®, with Astellas for Cimzia® and with Daiichi Sankyo for Vimpat®. Revenue reached € 8 million after € 30 million in 2017. 2017 benefitted from a received sales milestone payment, which did not reoccur in 2018 as the next milestone is still to be met.

The product profit sharing agreements for Dafiro® and Xyzal® reached a revenue of € 11 million (-32%), driven by the life cycle of these products.

“Other” revenue reached € 26 million (-44%) and includes milestones and other payments from our R&D partners. This is due to the divestiture of “Innere Medizin” and R&D payments received in 2017 not reoccurring.

1.3.5 Gross profit

 

 

 

 

 

 

Actual

Variance

€ million

2018

2017

Actual rates

CER

Revenue

4 632

4 530

2%

5%

Net sales

4 412

4 182

5%

8%

Royalty income and fees

92

108

-15%

-11%

Other revenue

128

240

-47%

-46%

Cost of sales

-1 198

-1 200

0%

1%

Cost of sales products and services

-823

-848

-3%

-3%

Royalty expenses

-241

-227

6%

11%

Amortization of intangible assets linked to sales

-134

-125

8%

9%

Gross Profit

3 434

3 330

3%

6%

 

 

 

 

 

In 2018, gross profit reached € 3 434 million (+3%), driven by the net sales growth and continued improved product mix. The gross margin improved from 73.5% in 2017 to 74.1%.

Cost of sales has three components: the cost of sales for products and services, royalty expenses, and the amortization of intangible assets linked to sales.

  • Cost of sales for products and services went down 3% to € 823 million.
  • Royalty expenses at € 241 million from € 227 million. Royalty expenses for marketed products, mainly Cimzia® and Vimpat® continued to increase due to product growth.

Amortization of intangible assets linked to sales: Under IFRS 3 (Business Combinations), UCB has reflected on its balance sheet a significant amount of intangible assets relating to the Celltech and Schwarz Pharma acquisitions (in-process research and development, manufacturing know-how, royalty streams, trade names, etc.). The amortization expenses of the intangible assets for which products have already been launched reached € 134 million after € 125 million in 2017 – driven by the launch of Cimzia® in psoriasis in the EU and the U.S. in 2018.

1.3.6 Recurring EBIT and recurring EBITDA

 

 

 

 

 

 

Actual

Variance

€ million

2018

2017

Actual rates

CER

Revenue

4 632

4 530

2%

5%

Net sales

4 412

4 182

5%

8%

Royalty income and fees

92

108

-15%

-11%

Other revenue

128

240

-47%

-46%

Gross Profit

3 434

3 330

3%

6%

Marketing and selling expenses

-964

-940

3%

6%

Research and development expenses

-1 161

-1 057

10%

11%

General and administrative expenses

-180

-192

-6%

-5%

Other operating income/expenses (-)

-24

-11

>100%

>100%

Total operating expenses

-2 329

-2 200

6%

8%

Recurring EBIT (rEBIT)

1 105

1 130

-2%

1%

Add: Amortization of intangible assets

170

160

6%

8%

Add: Depreciation charges

123

85

44%

47%

Recurring EBITDA (rEBITDA)

1 398

1 375

2%

5%

 

 

 

 

 

Operating expenses, encompassing marketing and selling expenses, research and development expenses, general and administrative expenses and other operating income/expenses, reached € 2 329 million (+6%) and reflected:

  • 3% higher marketing and selling expenses to € 964 million; marketing and selling efforts were enhanced and focused on Cimzia®, Vimpat® and Briviact® where most patients can benefit. Neupro® has reached its peak sales in 2018 and is expected to mature in its lifecycle going forward.
  • 10% higher research and development expenses to € 1 161 driven by the late-stage clinical development pipeline, including the phase 3 program for bimekizumab in psoriasis being fully recruited (results expected in Q4 2019). Hence the R&D ratio (as % of revenue) reached 25% after 23% in 2017.
  • 6% lower general and administrative expenses of € 180 million, thanks to good expense discipline.
  • Other operating expenses was € 24 million after € 11 million in 2017, mainly related to the collaboration agreement for the development of commercialization of Evenity™ (€ -10 million), provision for VAT & grant recoverability (€-19 million), disposal of assets (€ -6 million), impairment trade receivables (€ -4 million) offset with grants received (€ 15 million).

The total operating expenses in relation to revenue (operating expense ratio) at 50.3% after 48.6% in 2017, due to higher R&D expenses.

Recurring EBIT decreased to € 1 105 million, a minus of 2% compared to 2017, due to higher R&D expenses and higher amortization and depreciation:

  • Total amortization of intangible assets (product related and other) reached € 170 million (6%), driven by the launch of Cimzia® in psoriasis in 2018.
  • Depreciation charges increased to € 123 million (44%), after implementation of IFRS 16 (Leasing). The charges include € 10 million related to the pre-financing capital expenditure agreement between UCB and Lonza for the manufacturing by Lonza of PEGylated antibody fragment-based bulk active compounds, recognized in the cost of sales and are added back for recurring EBITDA calculation purposes.

Recurring EBITDA increased to € 1 398 million after € 1 375 million (+2%; +5% CER), driven by the core product growth compensating higher marketing and selling and higher R&D expenses. The recurring EBITDA ratio (in % of revenue) surpassed for the second year in a row the 30%-mark, namely 30.2%, from 30.4% in 2017.