2.2 Top risks in 2018

We maintain strong connectivity to our Board of Directors/Audit Committee and bring feedback with respect to risk back into the organization. The Global Internal Audit function is responsible for independently and regularly reviewing the top risks and agreeing with the business functions on their actions to respond. The risks presented are a representation of the top risks identified and managed in 2018.

Top risks identified

UCB’s reponse

Competition from biosimilars and new drug classes

Biosimilar entrants and their market impact are increasing globally. In parallel, the launch of new classes of biologic-based drugs contribute to the rich complexity of the biologics market. As a major component of its strategy, UCB supports the increasing innovation and access of biologics by investing in superior overall value propositions in target patient populations.
UCB engages in multiple focused strategies of differentiation as an innovative company. We actively pursue the balance of offering superior patient outcomes at a competitive cost of care, influenced by deeply understanding patient and regulatory stakeholder needs.

Intensity of successive product launches

UCB delivered strong pipeline results as we continue to pursue and invest in highly differentiated drugs focusing on the needs of well-defined populations. Our next wave of new solutions may come in rapid succession, creating a need for clear value messaging and launch agility.
UCB is matching its capabilities and reallocating resources and talents in an agile way to optimize launch success in a fast moving and changing environment. Leadership and capabilities will continue to evolve in line with our Patient Value Strategy with the development of innovative and adaptive capacity of all leaders and teams.

Exchange rate volatility

UCB’s revenues are subject to foreign currency exchange rate fluctuations due to the global nature of its operations. U.S. net sales accounted for 50% of total reported net sales in 2018. Manufacturing, research and development, and other operating expenses are incurred predominantly in Euro, Pound Sterling and Swiss franc. Consequently UCB’s results and cash flows are exposed to foreign currency volatility, predominantly to depreciation of U.S. Dollar, and to a lower extent to depreciation of Japanese Yen and appreciation of Swiss franc and Pound Sterling against Euro.
The financial risks of the UCB group are managed centrally. Group financial risk management policies have been established to identify the net foreign currency exposures of the UCB group, and to hedge anticipated foreign currency cash flows for a period of minimum 6 months and maximum 26 months. Also, the currency composition of the group’s assets and liabilities is closely monitored. For further details, refer to Note 4.

Top risks identified

UCB’s reponse

Global pricing and access challenges

Pharmaceutical pricing continues to be under scrutiny, with global payors, both government and private, looking for means to reduce costs. Payor strategies include downward pricing pressure, rebate considerations, increase in out-of-pocket costs to patients, and access restrictions.

Medicare access changes and other changes in U.S. government posture have the potential to impede UCB’s ability to provide the needed services and solutions to our patients.
UCB is actively engaging in collaboration with payer and industry associations to enable the best access for patients while promoting sustainable solutions that make a material difference across the globe.

Our executive and leadership team-level committees monitor and engage with the U.S. policy ecosystem to continue to deliver on our vision of making a difference for people living with severe diseases.

Cyber security/big data and artificial intelligence

Our world is increasingly dependent on the evolving digital landscape to meet today’s goals and to create new paradigms for the future. Cybersecurity and data privacy in all forms is of utmost importance to UCB, as breaches and disruptions can cause reputational, financial and operational damages. Artificial intelligence (AI) is changing the way we live and interact, with the experience already gained at UCB in the AI space, we are constantly reviewing how this can play a role in our patients’ lives and in how we do business.
UCB has a multifaceted cyber security and data management strategy, along with active programs for the proper prevention, detection and response controls. This includes continuous monitoring and analytics, intrusion incident detection and response, security testing and user awareness training and campaigns. Additionally, UCB is building a Cyber Crisis program that allows us to properly handle large security incidents (e.g. data breach or malware).1

UCB has established processes to comply with the new GDPR legislations. Ethical reviews will be an integral part of any relevant AI project at UCB.

Intellectual property

Intellectual Property rights (IP) are essential to foster innovation from increasingly complex science and rapidly evolving patient needs. Difficulties in getting and defending patents protecting valuable innovation are frequent. In a politically challenging environment, public perception on Intellectual Property is frequently negative and misunderstood.
UCB commits to selectively create, maintain, and defend IP when there is core innovation and real patient and societal value in doing so. We are proactively aware of the competitive landscape around our programs. UCB promotes a change in the global view on IP, innovation, and access through active public policy engagement and the promotion of risk sharing with other healthcare stakeholders. We continue to efficiently defend our IP with litigation wins on Vimpat® (U.S., U.K., NL), Neupro® (U.S.) and Toviaz® (U.S.).

1 In 2018, no substantiated customer data privacy complaints were identified through internal monitoring and audit activities. One incident relating to stolen IT material has been communicated to authorities and this IT incident has not resulted in high risk to the rights and freedoms of the data subjects concerned.

Follow up from 2017

Biologics supply

With the rapid increase in new biologics and biosimilars, UCB has recognized the potential for limited internal and external global large-scale capacity to meet our development and commercial needs. Our response strategy has been to both secure external supply and expand our internal production capacity. Actions implemented in 2018 on both fronts have allowed UCB to reduce this top risk.