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1.3. Revenue and recurring EBITDA

1.8 Adjusted EBIT and adjusted EBITDA

1.8 Adjusted EBIT and adjusted EBITDA

 

Actual

Variance

€ million

2020

2019

Actual rates

CER

Revenue

5 347

4 913

9%

8%

Net sales

5 052

4 680

8%

7%

Royalty income and fees

96

78

22%

24%

Other revenue

199

155

28%

29%

Gross Profit

3 984

3 645

9%

8%

Marketing and selling expenses

-1 221

-1 108

10%

12%

Research and development expenses

-1 569

-1 272

23%

24%

General and administrative expenses

- 196

- 195

1%

2%

Other operating income/expenses (-)

95

48

>100%

>100%

Total operating expenses

-2 891

-2 527

14%

16%

Adjusted (recurring) EBIT

1 093

1 118

-2%

-8%

Add: Amortization of intangible assets

215

190

13%

14%

Add: Depreciation charges

133

123

8%

8%

Adjusted (recurring) EBITDA

1 441

1 431

1%

-4%

Operating expenses, encompassing marketing and selling expenses, research and development expenses, general and administrative expenses and other operating income/expenses, went up to € 2 891 million reflecting digital business transformation, higher marketing and selling as well as higher research and development expenses. Total operating expenses in relation to revenue (operating expense ratio) increased to 54% after 50% in 2019, consisting of:

  • 10% higher marketing and selling expenses of  € 1 221 million, driven by launches and pre-launch 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 people living with psoriasis, zilucoplan and rozanolixizumab in myasthenia gravis and include expenses in connection with digital transformation to better interactions, targeting and marketing;

  • 23% higher research and development expenses of € 1 569 include the first time the R&D expenses for the acquired Ra Pharma, Engage Therapeutics and Handl Therapeutics research & development programs (refer to 1.2. Key events ). Also included are the termination costs (€ 54 million) in connection with the termination of the project padsevonil in focal onset seizures (refer to 1.2. Key events ). Ongoing high investments in UCB’s progressing pipeline encompass five late stage assets, including expenses in connection with digital transformation for better patient experience and faster development time. Slightly lower R&D expenses due to the pandemic related recruitment pause in the first half 2020 were compensated by higher pandemic related expenses for the safety of patients as well as ensuring patient recruitment in the second half of the year. Hence the R&D ratio reached 29% in 2020 after 26% in 2019.

  • With +1% almost stable general and administrative expenses of € 196 million, reflecting lower costs due to COVID-19 pandemic compensated by digital business transformation activities and the contribution to the UCB fund (€ 5 million) in connection with COVID-19 pandemic;

  • Other operating income of € 95 million (after € 48 million in 2019), driven by an income of € 96 million in connection of the commercialization of Evenity® in collaboration with Amgen, after an income of € 8 million in 2019 covering mainly marketing & selling as well as R&D expenses. UCB’s share to the total Evenity® contribution has turned to positive earnings for the first time. In 2019, “other” operating items were impacted by one-time positive contributions from investment grants, the divestiture of the campus in Germany and release of VAT provisions.

Due to higher operating expenses, adjusted (recurring) EBIT went down by (+2%) to € 1 093 million, compared to € 1 118 million in 2019.

  • Total amortization of intangible assets (product related and other) amounted to € 215 million, mainly driven by the launch of Nayzilam® in late 2019.

  • Depreciation charges at € 133 million after € 123 million.

Adjusted (recurring) EBITDA (Earnings before Interest, Taxes, Depreciation and amortization charges) reached € 1 441 million after € 1 431 million (+1%; -4% CER), driven by continued revenue growth and higher operating expenses, reflecting the investments into the future of UCB, namely into product launches and clinical development. The adjusted (recurring) EBITDA ratio for 2020 (in % of revenue) reached 27%, after 29% in 2019.

In compliance with the ESMA Alternative Performance Measures guidelines, “recurring EBITDA” was renamed into “adjusted EBITDA”. The calculation methodology remains unchanged.