UCB reports financials in line with expectations, integration completed, R&D milestones achieved and stronger focus on core business

EN | FR | NL

Management report : EN | FR

• Financial performance in the first half of 2008 in-line with expectations: Revenue as expected down by 11% to EUR 1.7 billion; underlying profitability (recurring EBITDA) reached EUR 358 million (-26%), reported net profit EUR 108 million (-37%).
• Integration of Schwarz Pharma completed ahead of schedule: Synergies in the first six months reached EUR 305 million; synergies of 2008 will reach EUR 350 million; targeted synergies of EUR 380 million to be reached almost two years ahead of schedule.
• Multiple regulatory milestones and approvals: In the first half of 2008, UCB achieved two approvals (Cimzia®, Crohn's disease and Xyzal® oral solution) in the U.S. and two positive opinions (Neupro®, RLS and Vimpat®, epilepsy) for Europe.
• New "SHAPE" initiative: Major global effort to improve competitiveness and profitability by re-allocating EUR 300 million within the next three years. The initiative includes increased focus, re-deployment of UCB's resources, advance of R&D and simplifying the organisation while successfully delivering UCB's new medicines to patients.
• Outlook 2008: Revenue is expected to exceed EUR 3.3 billion; underlying profitability (recurring EBITDA) 2008 is confirmed to reach approximately EUR 650 million. Net result might be significantly impacted by UCB's initiative "SHAPE".

BRUSSELS, BELGIUM – August 1st 2008 – 7:00 am CET – press release, regulated information – UCB today announced its consolidated interim financial results.
"The financial performance in the first six months is well in–line with expectations," says Roch Doliveux, CEO of UCB. "With one of the most exciting late stage pipelines in the industry and following recent approvals, like Cimzia® for Crohn's disease in the U.S., and positive opinions for Neupro® for RLS and Vimpat® for epilepsy in Europe, the time is now to further shape UCB and become a specialist company focused on successfully delivering our new medicines to patients."
Financial Performance in the First Half of 2008
In the first six months, total revenue reached EUR 1 691 million, in line with expectations and a decrease of 11% (currency adjusted -6%) compared to the first half of 2007. Net sales decreased by 9% to EUR 1 535 million, driven largely by allergy drug Zyrtec® (cetirizine) decline of 56% to EUR 132 million reflecting the U.S. patent expiration. UCB’s anti-epileptic drug, Keppra® (levetiracetam), continued its strong growth with sales up by 20% to EUR 597 million. The allergy product Xyzal® (levocetirizine) maintained its sales level outside the U.S. of the first six months of 2007 with EUR 104 million, and generated revenue of EUR 19 million from U.S. partnership with sanofi-aventis. The Parkinson's patch Neupro® (rotigotine transdermal system) had net sales increasing to EUR 35 million in 2008 due to strong growth in Europe.
UCB launched Cimzia® (certolizumab pegol), the first and only PEGylated anti-TNFa (Tumor Necrosis Factor alpha) antibody for Crohn’s disease in Switzerland (January 2008) and in the U.S. (April 2008). In the U.S., more than 1 000 patients are already under Cimzia® treatment and more than 5 000 physicians have enrolled in UCB's "CIMplicity™ Service Center" which offers a wide range of services to patients, physicians and payers, including in-home nursing administration of Cimzia®.
Gross profit of EUR 1 214 million was 10% lower than for the same period in 2007 mainly impacted by the U.S. patent expiration of Zyrtec®. Cost of sales of EUR 477 million decreased by 14% compared to 2007, impacted by a one-time non-cash inventory step-up of EUR 94 million. Excluding this effect, cost of sales would have increased by 3% predominantly due to costs related to Cimzia® and one-time costs related to Neupro®.
Marketing & Selling expenses of EUR 455 million were down by 14% compared to prior year, driven by synergies more than off-setting costs related to the launches of Xyzal® and Cimzia® in the U.S. and preparation for upcoming launches.
Research & Development expenses of EUR 370 million were down 1% reflecting synergies, while continuing to invest in UCB's development pipeline and discovery research.
General & Administrative expenses of EUR 119 million were down 12%, mainly due to realisation of synergies.
Restructuring & non-recurring expenses increased for the comparative period to EUR 39 million, further highlighting the implementation of synergies. 2007 restructuring and non-recurring expenses included EUR 47 million of capital gains.
As a result, operating profit (EBIT) decreased by 27% to EUR 224 million. Underlying profitability, measured by recurring EBITDA, reached EUR 358 million (-26% compared to prior year) reflecting the decrease in revenue and gross profit partially off-set by reduction in operating expenses. Net financial expenses declined by 10% to EUR 69 million. Income tax expenses decreased by 21% to EUR 48 million, corresponding to an average tax rate of 31%. Net profit was EUR 108 million, down 37% for the period compared to 2007.

Balance Sheet and Cash Flow
As of 30 June 2008, UCB's total liabilities and shareholders equity amounts to EUR 9 328 million almost the same level as the EUR 9 555 million as of year end 2007.
UCB’s net debt position as of 30 June 2008 decreased by 3% to EUR 1 860 million including financial borrowings of EUR 2.4 billion, mainly related to the acquisition of Schwarz Pharma. The net debt reduction stems mainly from positive currency impact on the portion of the syndicated loan denominated in U.S. Dollar.
Cash flow from operating activities reached EUR 185 million in 2008. Cash flow from investing activities amounted to an outflow of EUR 65 million mainly due to investments in fixed assets (EUR 59 million) and intangible assets (EUR 14 million), partially offset by an inflow from proceeds from divestments (EUR 17 million). Cash flow from financing activities was impacted by the dividend payment of EUR 130 million amounting to an outflow of EUR 79 million.

Integration Complete
During the first half 2008, UCB already achieved synergies of EUR 305 million. For the year 2008, synergies are scheduled to reach EUR 350 million. When annualized, this means that the committed synergy target of EUR 380 million will be achieved by early 2009. By this, UCB is completing the integration of Schwarz Pharma and generating the committed synergies almost two years ahead of schedule.

Neupro® Update
UCB is currently implementing a full cold-chain storage and distribution system for Neupro® (rotigotine transdermal patch) in Europe. A variation is under review by the European authorities. If successful, UCB hopes that Neupro® will be available again to all patients (including new patients) in Europe by the first half of 2009. In addition UCB will seek to initiate a dialogue in 2009 with the U.S. health authorities on a potential re-launch in the U.S. Data to support this dialogue are currently being collected and evaluated.

R&D Update: Multiple Regulatory Milestones and First Approvals
In the first half of 2008, UCB achieved multiple regulatory milestones and gained several regulatory approvals and positive opinions:

• Approval in the U.S. by the FDA (U.S. Food and Drug Administration) :
  • Cimzia® (certolizumab pegol), for the treatment of moderate to severe Crohn's Disease; Cimzia® was made available to the first patients within 48 hours following approval;
  • Anti-histamine Xyzal® (levocetirizine dihydrochloride) oral solution.
• Positive opinion recommending marketing authorisation for the EU:
  • Neupro® (rotigotine transdermal patch) for the treatment of Restless Legs Syndrome (RLS). UCB has filed a manufacturing variation with the EMEA (European Medicines Agency and plans to launch Neupro® in the EU in the first half of 2009;
  • Vimpat® (lacosamide) for adjunctive therapy in epilepsy. UCB plans to initiate launching Vimpat® within the EU in September 2008.

During the first half of 2008, UCB was informed that the European regulatory authority has rejected the company’s appeal following refusal of the Marketing Authorization Application for Cimzia® in Crohn's disease. At the end of July, UCB received a not-approvable letter from the U.S. FDA for Vimpat® for diabetic neuropathic pain.
UCB achieved four major filings with regulatory authorities:

• Keppra® XR (levetiracetam) for epilepsy in the U.S.;
• Keppra® for pediatric indication in epilepsy in the U.S.; the FDA granted also pediatric exclusivity;
• Cimzia® for the treatment of rheumatoid arthritis (RA) in the U.S.;
• Cimzia® for the treatment of RA in Europe.

Clinical developments in the first half of 2008 include:

• Following encouraging Phase II results for CDP791 in non-small cell lung cancer, UCB is evaluating partnership options;
• Following recent Phase II results, a decision whether to start Phase IIb with lacosamide to treat fibromyalgia will be made by the end of 2008;
• For Cimzia®, UCB is commencing efforts to develop additional indications in rheumatology, while continuing to evaluate further development or alternatives in psoriasis;
• UCB is extending its investments in Vimpat® (lacosamide) and brivaracetam in epilepsy, signifying the company’s commitment to increasing its epilepsy leadership world-wide.

SHAPE: UCB's New Initiative for Stronger Focus on its Core Business, Building the Next Generation Biopharma Leader
UCB is actively pursuing its transformation into a leading biopharmaceutical company. UCB is continuing to invest in its late stage pipeline and innovative breakthrough research while preparing launches of multiple new products in its core fields of CNS and immunology disorders. With the recent approval of Cimzia® for Crohn's disease in the U.S. and positive opinions in the EU for Neupro® for Restless Legs Syndrome and for Vimpat® for epilepsy, UCB is successfully reaching the point in time to become a specialist company. At the same time and within the short span of approximately twelve months, UCB is facing patent expirations for its two major products.
As a next step to focus on an accelerated specialist transformation, UCB is launching an initiative called "SHAPE" which aims to re-allocate EUR 300 million within the next three years.
This initiative is expected to re-deploy UCB's resources on its new growth drivers, more rapidly advance research and development efforts, and simplify its organisation. Such efforts should result in enhancing UCB's profitability and competitiveness in the fast-changing biopharma world. First details of this initiative are expected to be communicated by the end of the summer 2008.

Financial Outlook 2008 and beyond
2008 is a year of progress in the execution of UCB's strategy and of continued investment in the company's future growth. While revenue is expected to exceed EUR 3.3 billion, this decline versus 2007 is due in substantial part to the patent expiry of Zyrtec® and the expected start of generic competition to Keppra® in the U.S., along with the impact of continued deterioration of the U.S. dollar versus the euro.
UCB’s underlying profitability (recurring EBITDA) for full year 2008 is expected to reach approximately EUR 650 million. This includes an estimated negative impact of the current Neupro® supply situation of approximately EUR 30 million, but this impact as well as incremental costs of product launches and market preparation activities are expected to be compensated by ongoing cost-savings efforts tied to post-acquisition synergies. Net result as reported might be impacted significantly by potential one-time effects from the SHAPE initiative.
As a result of "SHAPE", UCB's underlying profitability (recurring EBITDA) in 2009 is expected to be at least at the same level as 2008 and increasing afterwards based on growth from newly launched products. However, UCB's net result as reported in 2009 might also be impacted by one-time effects related to any decisions as a result of the SHAPE initiative.

Key figures from the consolidated interim financial statements*

* the full consolidated interim financial report is available on the internet: www.ucb-group.com

Further information
Antje Witte, Corporate Communications & Investor Relations, UCB Group
T +32.2.559.9414, antje.witte@ucb-group.com
Michael Tuck-Sherman, Investor Relations, UCB Group
T: +32.2.559.9712, michael.tuck-sherman@ucb-group.com

About UCB
UCB (Brussels, Belgium) (www.ucb-group.com) is a global leader in the biopharmaceutical industry dedicated to the research, development and commercialization of innovative pharmaceutical and biotechnology products in the fields of central nervous system disorders, allergy/respiratory diseases, immune and inflammatory disorders and oncology. UCB focuses on securing a leading position in severe disease categories. Employing around 12 000 people in over 40 countries, UCB achieved revenue of EUR 3.6 billion in 2007. UCB S.A. is listed on Euronext Brussels.

Forward looking statement
This press release contains forward-looking statements based on current plans, estimates and beliefs of management. Such statements are subject to risks and uncertainties that may cause actual results to be materially different from those that may be implied by such forward-looking statements contained in this press release. Important factors that could result in such differences include: changes in general economic, business and competitive conditions, effects of future judicial decisions, changes in regulation, exchange rate fluctuations and hiring and retention of its employees.