1.3 Revenue and recurring EBITDA

1.3 Revenue and recurring EBITDA

1.3.1 Net sales by product

Total net sales in 2019 increased to € 4 680 million, 6% higher than last year or +7% at constant exchange rates (CER). Net sales before “designated hedging reclassified to net sales” were up by 11% (+7% CER). Adjusted for divestitures in 2018 (mainly “Innere Medizin” – Germany), in Q1 2019, the iron supplement Niferex® and before hedging growth was +13% (+9% CER).

This was driven by the continued strong growth of the core products, Cimzia®, Vimpat®, Keppra®, Briviact® and Neupro®, to combined net sales of € 4 344 million (+14%; +10% CER) representing more than 90% of UCB’s total net sales before hedging.

 

 

 

 

 

 

Actual

Variance

€ million

2019

2018

Actual rates

CER

Immunology

 

 

 

 

Cimzia®

1 712

1 446

18%

14%

Neurology

 

 

 

 

Vimpat®

1 322

1 099

20%

15%

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

770

790

−3%

−5%

Neupro®

319

321

−1%

−3%

Briviact®

221

142

56%

49%

Established brands/Other products

440

514

−14%

−15%

Net sales before hedging

4 784

4 312

11%

7%

Designated hedges reclassified to net sales

−104

100

>−100%

 

Total net sales

4 680

4 412

6%

7%

 

 

 

 

 

Core products

Cimzia® (certolizumab pegol), for patients living with inflammatory TNF mediated diseases, net sales went up to € 1 712 million (+18%; +14% CER), driven by continued, sustainable growth in all regions. Growth is also driven by new patient populations like women in childbearing age and people living with non-radio graphic axial spondyloarthritis and psoriasis.

Vimpat® (lacosamide) with net sales of € 1 322 million (+20%; +15% CER) shows continued strong growth in all regions thanks to reaching more and more people living with epilepsy. Treatment options available to patients cover mono- and adjunctive therapy as well as for pediatric use.

Keppra® (levetiracetam), available for patients living with epilepsy, reported net sales of € 770 million (−3%; −5% CER). The evolution reflects the established brand and the maturity of the product. In Europe, Keppra® net sales were affected by a local, one-time rebate adjustment in the first half 2019.

Briviact® (brivaracetam) available for people living with epilepsy, reached net sales of € 221 million, a plus of 56%, (+49% CER). This is driven by significant growth in all regions where Briviact® is available to patients. Briviact® has a different mode of action from Vimpat® and differentiates from Keppra®.

Neupro® (rotigotine), the patch for Parkinson’s disease and restless legs syndrome, showed a slight decrease of net sales to € 319 million (−1%; −3% CER). Smaller declines in the U.S. and Europe were almost compensated by good growth in international markets.

Net sales by product (pie chart)

Established brands/Other products

Overall, net sales went down by 14% (−15% CER) to € 440 million – due to the divestiture of products. Adjusted for the divestitures, the business was flat, reflecting the maturity of the portfolio and generic competition. “Establish brands” include UCB’s allergy products Zyrtec® (cetirizine, including Zyrtec®-D/Cirrus®) and Xyzal® (levocetirizine), which together also showed overall stable net sales.

Designated hedges reclassified to net sales were negative with € 104 million (after € 100 million positive in 2018) 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, the Japanese Yen, the British Pound and the Swiss Franc.

1.3.2 Net sales by geographical area

 

 

 

 

 

 

 

 

Actual

Variance actual rates

Variance CER

€ million

2019

2018

€ million

%

€ million

%

Net sales U.S.

2 546

2 158

388

18%

256

12%

Cimzia®

1 088

896

192

21%

136

15%

Vimpat®

1 001

822

179

22%

127

15%

Keppra®

189

221

−32

−14%

−42

−19%

Briviact®

170

109

61

56%

52

48%

Neupro®

97

101

−4

−4%

−9

−9%

Established brands/Other products

1

9

−9

−95%

−9

−95%

Net sales Europe

1 332

1 325

7

1%

8

1%

Cimzia®

429

400

30

7%

29

7%

Keppra®

196

216

−20

−9%

−20

−9%

Vimpat®

236

206

29

14%

29

14%

Neupro®

170

174

−4

−2%

−4

−2%

Briviact®

45

29

16

53%

16

53%

Established brands/Other products

256

300

−43

−14%

−42

−14%

Net sales international markets

906

829

76

9%

53

6%

Keppra® (including E Keppra®)

385

352

32

9%

21

6%

Cimzia®

194

150

45

30%

42

28%

Vimpat®

86

70

15

22%

12

17%

Neupro®

52

46

6

12%

3

7%

Briviact®

6

4

2

57%

2

55%

Established brands/Other products

183

207

−23

−11%

−27

−13%

Net sales before hedging

4 784

4 312

472

11%

317

7%

Designated hedges reclassified to net sales

−104

100

−204

>−100%

 

 

Total net sales

4 680

4 412

268

6%

317

7%

 

 

 

 

 

 

 

U.S. net sales reached € 2 546 million (+18%; +12% CER). Key driver was the double-digit growth of Cimzia® and Vimpat® as well as Briviact®. Keppra® is impacted by generic competition, while Neupro® showed good net sales in a generic market environment.

Net sales in Europe were € 1 332 million (+1%; +1% CER), due to sustainable growth of the core products reaching combined net sales of € 1 075 million – a plus of 5% and representing 81% of UCB’s net sales in Europe. The established brands went down due to divestitures. Adjusted for the divestitures, total net sales in Europe were up by 3%.

International markets net sales increased to € 906 million (+9%; +6% CER). The core products reached combined net sales of € 723 million (+16%) representing 80% of UCB’s net sales in this region. This was compensated by impacts from generic competition and divestitures within the established brands portfolio. Adjusted by divestitures, the growth in the International markets net sales was 13%.

With € 368 million, Japan represents the largest market and showed a growth of 21% (+13% CER) where Keppra® reported net sales of € 177 million (+14%; +7% CER), Cimzia® went up to € 44 million (+31%; +22% CER), Neupro® reached € 34 million (+10%; +3% CER) and Vimpat® increased to € 41 million (+86%; 74% CER).

Net sales in China, the second largest market, were € 139 million (−8%; −9% CER), due to divestitures.

Designated hedges reclassified to net sales were negative with € 104 million (after € 100 million positive in 2018) 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, the Japanese Yen, the British Pound and the Swiss Franc.

Net sales by geographical area (pie chart)

1.3.3 Royalty income and fees

 

 

 

 

 

 

Actual

Variance

€ million

2019

2018

Actual rates

CER

Biotechnology IP

38

56

−32%

−38%

Zyrtec® U.S.

11

12

−3%

−8%

Toviaz®

19

19

−3%

−8%

Other

11

5

>100%

85%

Royalty income and fees

78

92

−15%

−21%

 

 

 

 

 

In 2019, royalty income and fees reached € 78 million after € 92 million (−15%).

The biotechnology IP income is continuously impacted by patent expirations, however benefitted from a one-time improvement in 2018.

Royalties collected for Zyrtec® in the U.S. and for the overactive bladder treatment Toviaz® (fesoterodine) reflect a lower level of royalties due to maturity of the products.

1.3.4 Other revenue

 

 

 

 

 

 

Actual

Variance

€ million

2019

2018

Actual rates

CER

Contract manufacturing sales

109

83

32%

31%

Partnerships in Japan

20

8

>100%

>100%

Product profit sharing

0

11

−100%

−100%

Other

26

26

−1%

−6%

Other revenue

155

128

22%

20%

 

 

 

 

 

Other revenue increased to € 155 million from € 128 million (+22%).

Contract manufacturing sales went up to € 109 million from € 83 million, due to contract manufacturing of divested products.

Partnering activities in Japan (Otsuka for E Keppra® and Neupro®, Daiichi Sankyo for Vimpat® and Astellas for Cimzia®) reached a total of € 20 million after € 8 million, thanks to a sales milestone received for E Keppra®.

The revenue from product profit sharing agreements came down zero from € 11 million. This was related to the business of “Innere Medizin” which was divested in 2018.

“Other” revenue remained roughly stable at € 26 million and includes milestone and other payments from R&D partners.

1.3.5 Gross profit

 

 

 

 

 

 

Actual

Variance

€ million

2019

2018

Actual rates

CER

Revenue

4 913

4 632

6%

7%

Net sales

4 680

4 412

6%

7%

Royalty income and fees

78

92

−15%

−21%

Other revenue

155

128

22%

20%

Cost of sales

−1 268

−1 198

6%

4%

Cost of sales products and services

−816

−823

−1%

−1%

Royalty expenses

−298

−241

24%

18%

Amortization of intangible assets linked to sales

−154

−134

14%

13%

Gross Profit

3 645

3 434

6%

8%

 

 

 

 

 

In 2019, gross profit reached € 3 645 million or plus 6% – in line with the revenue evolution and reflecting a stable gross margin of 74% compared to 2018.

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:

  • The cost of sales for products and services decreased to € 816 million (−1%).
  • Royalty expenses went up to € 298 million from € 241 million due to the growth of marketed core products.
  • Amortization of intangible assets linked to sales: The amortization expenses of the intangible assets for products which have already been launched increased to € 154 million, mainly due to the new indication launches for Cimzia® and the launch of Nayzilam® in late 2019.
    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.).

1.3.6 Recurring EBIT and recurring EBITDA

 

 

 

 

 

 

Actual

Variance

€ million

2019

2018

Actual rates

CER

Revenue

4 913

4 632

6%

7%

Net sales

4 680

4 412

6%

7%

Royalty income and fees

78

92

−15%

−21%

Other revenue

155

128

22%

20%

Gross Profit

3 645

3 434

6%

8%

Marketing and selling expenses

−1 108

−964

15%

12%

Research and development expenses

−1 272

−1 161

10%

8%

General and administrative expenses

−195

−180

8%

7%

Other operating income/expenses (−)

48

−24

>100%

>100%

Total operating expenses

−2 527

−2 329

9%

6%

Recurring EBIT (rEBIT)

1 118

1 105

1%

12%

Add: Amortization of intangible assets

190

170

12%

10%

Add: Depreciation charges

123

123

0%

−2%

Recurring EBITDA (rEBITDA)

1 431

1 398

2%

11%

 

 

 

 

 

Operating expenses, encompassing marketing and selling expenses, research and development expenses, general and administrative expenses and other operating income/expenses, reached € 2 527 million reflecting higher investments into marketing and selling as well as into research and development activities. Hence, total operating expenses in relation to revenue (operating expense ratio) went up to 51% after 50%, driven by:

  • 15% higher marketing and selling expenses of € 1 108 million, focused on Cimzia®, here especially the launches in psoriasis in the U.S. and Europe and the launch in non-radiographic axial spondyloarthritis in the U.S, as well as Vimpat®, Briviact® and launch preparations for Evenity® in Europe.
  • 10% higher research and development expenses of € 1 272 million, resulting in a R&D ratio of 26% in 2019 after 25% in 2018; and reflecting higher investments in UCB’s late stage, progressing pipeline, including 11 confirmatory studies (last clinical studies before submission to authorities) ongoing in 2019.
  • 8% higher general and administrative expenses of € 195 million, also driven by preparations and additional external resources for the new organization model implemented at UCB in 2019.
  • other operating income of € 48 million after expenses of € 24 million, due to investment grants, the divestiture of the campus in Monheim (Germany) and the release of VAT provisions supported by an income of € 8 million (2018: expenses of € 10 million) from the collaboration with Amgen in connection of the development and commercialization of Evenity®.

Despite these investments, recurring EBIT reached € 1 118 million (+1%).

  • total amortization of intangible assets (product related and other) amounted to € 190 million, an increase of 12% mainly driven by to the new indication launches for Cimzia® and the launch of Nayzilam® in late 2019.
  • depreciation charges remained stable at € 123 million.

Recurring EBITDA reached € 1 431 million after € 1 398 million (+2%; +11% CER), driven by the strong net sales growth which compensated the higher operating expenses, reflecting the investments into the future of UCB, namely into product launches and product development. The recurring EBITDA ratio for 2019 (in % of revenue) was 29.1%, from 30.2% in 2018.