Hello! Welcome to the UCB Half Year 2023 Capital Market Call.
My name is Antje, and I'm the Head of Investor Relations at UCB. Before I introduce you to the agenda and hand over to the speakers today, I'd like to make some remarks. This video conference is being recorded. This presentation and the following Q&A session are covered by the disclaimer and safe harbor statement as stated on slide 2 of the slide deck. Please kindly read this carefully. You can find the presentation in our download center if you dial in by phone. The presentation and the following Q&A session are intended for institutional capital market participants. If you're not, please disconnect now. Following your feedback, we implemented some changes.
We have shortened the presentation and reduced the number of speakers to have more time for Q&A. You have been invited to ask your questions live. With this, I'd like to introduce to you our speakers for today: Jean-Christophe Tellier, our CEO, and Sandrine Dufour, our CFO. In the Q&A session, not only Jean-Christophe and Sandrine, but also our Chief Medical Officer, Iris Löw-Friedrich, Emmanuel Caeymaex, Head of Immunology and US, are here to answer your questions. As Charl van Zyl, our former head of neurology, has recently left the company to join Lundbeck as a CEO, we have asked two members of his leadership team to join the Q&A panel.
It's my pleasure to introduce to you Kimberly Moran, Head of U.S. Rare Diseases, and Mike Davis, Head of Global Epilepsy. Kim is launching with her team Rystiggo, as we speak, and Mike is managing our evolving epilepsy portfolio. With this, Jean-Christophe, over to you.
Thank you very much, Antje. Good morning and good afternoon, good evening, everyone. It's a pleasure to welcome you to our half-year results. Maybe I can go directly to the slide after the agenda, please. Get the next one, please. As you see, in this slide, we are at an inflection point now, and I think that the end of the first half of 23 mark this moment, which is an important one for UCB. Which is a moment where we can leave behind the absorptions at the necessary decline of our product after the loss of exclusivity, and start to build a new phase of growth for the company, build on current growth drivers, as well as new assets.
Actually, we are today in this new period and starting this new period of growth, thanks to a few elements. The first one is the good resistance, performance, and resilience of our current growth drivers. I would like to mention Cimzia, but also, of course, Briviact and Evenity. The second element is the fact that We are incorporating in our portfolio new asset, thanks to the success that we have had in our development portfolio. Here, of course, I have in mind Bimzelx, Fintepla, and Rystiggo. Last also, but not least, we are able to enter into this new phase because we are doing a rigorous and disciplined allocations of our resource, so that we can make sure that we provide sufficient investments behind the preparation and the executions of the launches, as well as managing the tail of our product.
Next slide, please. Because of all of that, I think we can qualify the first half of 2023 as a solid performance for UCB. You can look at this slide from different lenses. There is one lenses, which is the classical one, which is the revenue or the net sales, and here you are still observing a decline of our revenue of our sales. As I said, it's because of the last period where we had the loss of exclusivity and we need to absorb. Because we are starting a new phase, we can have starting this new growth. Actually, if I put on the side the loss of exclusivity of Vimpat, we are currently growing already by 8%.
The second lenses that you can look at the first half is what have been achieved during the first half in terms of new patients population. By adding new patients populations, being able to provide access to these new patients populations, it is, of course, new source of growth for the company. During the first half, half of 2023, we achieved approval of Fintepla for Lennox-Gastaut syndrome in Europe. We have also, in Europe, achieved the ability to launch Bimzelx in PSA, psoriatic arthritis and AS, axial spondyloarthritis. We are actually, as we speak, launching Rystiggo in the U.S. New tools, new assets, new patients population that will fuel growth for the company for the future. The third lenses that you can have to look at our first half performance is how confident we are for the full year guidance.
Here you can see that we are confirming our guidance for 2023. Next slide. This is not the end of the journey. We are expecting in the second half of 23, 7 approvals for ongoing regulatory reviews in various geography. First, as you know, we are waiting the actions of the FDA for bimekizumab in psoriasis in the U.S. for the Q3 of this year. We are also, on top of that, waiting for AxSpA and PsA approval in Japan from bimekizumab. We are waiting for the rozanolixizumab approbation for generalized myasthenia gravis in Japan.
We are also expecting for zilucoplan, our next new asset, approval for generalized myasthenia gravis in the U.S. and in EU, as well as additional filing that will get approval later on. You see the journey of bringing new assets, new territories, new patients populations into the UCB portfolio is just starting now. Next slide, please. I would like to now quickly zoom in on three of our key growth drivers: epilepsy, generalized myasthenia gravis, and immunology. Epilepsy reached the inflection point, because if we are today in this junction before the loss of exclusivity and the new growth, epilepsy portfolio is for us, the perfect illustrations of that, because of the loss of Keppra in Japan and Vimpat in Europe and in the U.S.
As you can see, we can build growth thanks to the very good growth and accelerations of growth, actually, of Briviact globally, as well as Fintepla. We have reached already more than EUR 100 billion during the first half of the year, and Nayzilam. Next slide, please. The new and second pillar of growth that I would like to illustrate is UCB starting the journey in generalized myasthenia gravis. Here, our objective is, of course, to elevate the standard of care and to maximize patients' outcomes, because it is our purpose in all different areas we are evolving. Now, with Rystiggo, you see on the left-hand side, the patients' population that we think could be addressed and could be treated with our portfolio.
With Rystiggo, our anti-FcRn antibody, we are the first and only targeted therapy, which is able to treat patients who are either acetylcholine receptor positive or MuSK positive in generalized myasthenia gravis. Later, with zilucoplan, our complement C5 inhibitor, we will have in our hands the first self-administration targeted therapy that inhibit the complement cascade. Altogether, we will have a portfolio to treat broadly all patients population from different angle, and we will be able to satisfy patients who want to be treated at home, who want to be treated in a hospital, want to continue to go with infusions, and also the diversity from a physician standpoint. Next slide, please. Last but not least, our 3 pillar of growth, with also 3 growth drivers today, is immunology. I mentioned the resilience and the performance of Cimzia.
15 years after the launch, we were the 5th anti-TNF of the marketplace, and we continue to gain market share, thanks to the diversifications and the differentiation that we have been able to build and to provide our patients. You see here 2% of growth, but in fact, if the underlying volume growth of the product was 8%, the difference is mainly due to difference in inventory. The second growth drivers is Bimzelx, that we are starting to launch in a lot of different geographies. We have already, been approved in 10 different by 10 different regulatory agencies, and we have been approved in 36 new different countries there. I will come on Bimzelx on a specific slide. Evenity, please, I also would like you to remember that the contribution of Evenity to our growth come from two side.
One, we are booking the revenue directly in Europe. That's the numbers that you see here. We are already enjoying very successful launch in the bone builder market in a lot of different geographies. Two, we are also gaining a net contribution from Amgen, which is a significant growth of +44% for the first half of the year. Next slide, please. When you look at the performance of Evenity globally, you can see on the right-hand side, the impressive growth, then success of the product as which is translated here in the net contribution from Amgen to UCB PNL.
You see on the left-hand side that we are already reaching 485,000 patients across the globe, with 30% of market share in the bone builder market, we are gaining in the leadership that we wanted to achieve. Last, but of course not least, I would like to close before handing over to Sandrine, with Bimzelx. On the last slide, you will see the Bimzelx leadership builder that we are strengthening months after months. On the left-hand side, we are currently pleased with the fact that more than 10,000 patients are currently benefiting from Bimzelx across the different geographies.
On the right-hand side, you can see here that on the three main regions that today we have launched the product, Japan, Europe, and Canada, we have reached already more than 35% of dynamic market share, meaning the ability of the new patients to be treated by Bimzelx today is more than 1 out of 3. Quickly after the launch of the product, which is a remarkable performance. As you can see, a great first half of the year, solid growth, an ability to continue to build on the growth of our growth drivers, which demonstrate resilience during the first half of the year. 2, a portfolio that continued to evolve with new assets, new territories, new patients, populations coming in.
Success of the launches, where we have been already able to implement them. I'm sure that Rystiggo in the U.S. will be also a confirmation of this ability to execute. Three, a solid discipline and rigorous allocations of resource and cost management that allow us to deliver the result that Sandrine will now further comment. Thank you.
Thank you, Jean-Christophe, good morning, good afternoon, everyone. Let me present these robust first half results, as well as the confirmation of our guidance. I will directly go to the next page to give the key highlights. As expected, the first half results reflect the impact of the loss of exclusivity of Vimpat. You heard Jean-Christophe explaining that excluding this impact, we have an underlying net sales growth of 8%. If I look at the trends of the last month of the semester, I can say that the negative impact of the loss of exclusivity are now mostly behind us, and this is what gives us the comfort to talk about an inflection point as we enter the second part of the year.
From a resource allocation point of view, we have continued to be very disciplined to make sure that we adequately fund the multiple launches in terms of products, new indications, and geographies. Our focus for growth transversal program is yielding very positive results. We will have achieved a run rate of about EUR 200 million of sustainable cost efficiency by year-end, by closely managing all our cost categories, and this contributes to fund the increase of investments behind the launches, as well as absorb the inflation impact, which year-over-year is not insignificant. As committed, the Zogenix is becoming earnings accretive as of 2023. The profile of margin between the first half and the second half will be different as we accelerate investments to support the launches, and I, of course, will come back on that.
If we move now to the next page, I will look at the full P&L, and I will start with the net sales. The total net sales reached EUR 2.4 billion. It's a 12% decrease, 14% at constant rate, and as I said, adjusted for Vimpat, growth at constant rate was 8%, and this was supported by solid volume growth. Next to the net sales, revenues achieved EUR 2.6 billion. It's a decrease of 11%. I would like to mention that the other revenues include a one-time milestones payment of EUR 70 million linked to our partnership in Japan for Vimpat. As a reminder, we also had a similar amount of EUR 70 million for the sale of intellectual property rights for Olokizumab last year in the first half. Year-over-year, this is neutral.
Adjusted gross profit was EUR 2 billion, with a decrease in line with revenues and a stable adjusted gross margin of 77%. Total OpEx decreased by 15% to EUR 1.3 billion, reflecting lower expenses and higher other operating income. If I start with marketing and selling expenses, they grew by 3% to EUR 753 million, driven by the launches, the pre-launch activities. We have the ongoing launch activities of Fintepla, Bimzelx, and the global launch preparations for Bimzelx in the U.S., Rystiggo, and zilucoplan in generalized myasthenia gravis. R&D expenses decreased by 5% to EUR 759 million. This is reflecting the investments in the late stage pipeline, as well as the earlier stage activities. The R&D ratio increased from 27%- 29%, this is a function of the net sales decrease.
G&A decreased by 9%, and the other operating income increased significantly to EUR 350 million. First, this is the result of the net contribution from Amgen in the commercialization of Evenity, which grew by more than 40%, from EUR 108 million- EUR 156 million. Second, as we had mentioned back in February, we sold a portfolio of established brands in Europe for EUR 145 million. In total, adjusted EBITDA reached EUR 801 million, after EUR 814 million in the first half of last year. It's a decrease of 2% and a decrease of 9% at constant rate. This is reflecting the lower revenues, the lower operating expenses and i t corresponds to a 31% margin after the 28% margin in the first half of last year.
Even if you exclude the contribution of the sales of the established brand products, this is a solid 25%. Moving to profits. Profits amounted to EUR 311 million. It's a 22% decrease versus last year. If I look at the conversion from EBITDA to profits, we had higher amortization of intangible in the first half of 2023. This is linked to the Zogenix acquisition. We had lower other expenses versus 2022, as the first half last year was impacted by Zogenix acquisition.
Financial expenses were higher at EUR 7 million-EUR 9 million, not just because of higher net debt linked to the Zogenix acquisition and higher interest rates, but also due to a non-recurring positive currency impact in 2022. We had EUR 25 million positive, while the non-recurring currency impact this first half, is a EUR 9 million negative. An effective tax rate ended up at 22%. That compares to 17% in H1 last year. The increase in tax rate is explained by the expected drop in profit before tax compared to last year, where the tax charge remains stable and a one-off reversal of a deferred tax liability in 2022. Finally, the core EPS was EUR 2.63 per share. This is a decrease of 16% versus last year. In summary, we delivered healthy financial reserves for the first half.
We see the inflection points in the net sales performance, leaving the loss of exclusivity impacts behind us, and we were able to decrease OpEx and to significantly improve other operating income, both with the increase of Evenity contribution and the sale of products. All of that puts us in a comfortable position to invest behind our ongoing and upcoming launches in the second half of the year. That takes me to the next page, where we confirm the 2023 guidance. Revenue is expected in the range of EUR 5.15 billion-EUR 5.35 billion. Adjusted EBITDA margin in the range of 22.5%-23.5% of revenue. Core EPS in the range of EUR 3.40-EUR 3.80 per share.
We expect a different top-line trajectory in the second half versus the first half, as the loss of exclusivity impact is expected to diminish significantly in the second half, and we expect also higher contribution from the launches. The EBITDA margin is expected at a significantly lower level in H2 versus H1. You know, this was already the case in previous years, we will increase, in the second half, our marketing and sales investments to support the launches of Bimzelx, of Rystiggo, of zilucoplan. We expect as well to see higher RMD in H2 versus H1, with the progress of our clinical programs. Last, the benefit of the sale of the five established brands product, which was, as indicated in February, reflected in the guidance, will not be repeated in the second half.
We confirm our peak sales guidance for Briviact and Fintepla, knowing that Cimzia peak sales of more than $2 billion was already achieved last year, and our guidance of 2025 is unchanged. As you know, it's largely a function of Bimzelx, as well as other growth drivers such as Briviact, Fintepla, Evenity, and the future launches of Rystiggo and zilucoplan, which will all contribute to the top-line growth as well as margin expansion. With this, let me thank you and hand over back to Jean-Christophe.
Thank you, Sandrine. I just would like to close this first part of the call before opening the Q&A. With this headline that I would like you to keep in your mind, that we have a strong growth ahead. Next slide, please. We have reached an inflection point, we are currently, of course, managing the last part of the loss of exclusivity. We are delivering on our pipeline. We are launching a new product that can help us to bring new treatment options for new patients populations. With this, we will continue to create value for shareholders and all stakeholders now and in the future.
This is with this inflection point that I would like to close the first part of the call, and now I would like to thank you for your attention and open the floor to question. Thank you.
Thank you, Jean-Christophe. Thank you, Sandrine. We will now start the Q&A session. To ask a question, please raise your hand, and we have already a couple of people who did so. We will unmute your line when we call up. Please limit yourself to two questions. You can also type your questions in the chat, or if you prefer, send me an email under Antje.Witte@ucb.com, and I will ask the question on your behalf to the presenters. Let's go to the questions. The first on the line is Jeroen Van den Bossche from KBC. While we are unmuting him, the second on the line will be Stacy Ku from Cowen.
Hello, thank you. Thanks for my question. I'll just have one question, so to leave some time. One of the things that I'm personally struggling with is looking at Rystiggo and zilucoplan with terms of positioning. When will you, first of all, reveal the pricing on Rystiggo? Then could you, you know, present us with the physician's view on why they would choose either or Rystiggo or zilucoplan over FRT modes today?
Hi, thank you. First question on pricing. Pricing, we have published for the U.S. specifically. The current price is $6,050 per vial. What we need to really be aware of with Rystiggo is that it is a cyclical therapy. Dependent upon the patient's weight, as well as the number of cycles a patient needs, the total cost per year is quite variable. At that price point, from a WAC perspective, it is at parity with Vyvgart. Now in terms of co-positioning, we have such an advantage in terms of bringing two products almost simultaneously to market. With Rystiggo, we're looking at patients that often want the direct support of a healthcare provider, allowing for that in-office administration.
Additionally, with Rystiggo, we have a broader population, given the novel and first and only indication for MuSK positive patients. If you look at zilucoplan getting approval, it'll be the first and only self-administration. This allows a lot of flexibility for physicians. Patients want individualized choices. If you look at young women, which are predominantly a MuSK patient, they want flexibility in terms of how they're treated. If you look at older males, another part of our population, they may want to interact with their healthcare provider and have an infusion. Having this individualized flexibility for in-office or at home allows us to meet the individual needs of patients with generalized myasthenia gravis.
Thank you. The next question is coming from Stacy Ku from Cowen, and thereafter, I will read a question from Peter Welford. Stacy, please go ahead.
Hi, thanks so much for taking our questions. Hopefully, you guys can hear me okay.
Very well.
Oh, wonderful. The first question is regarding Bimzelx. Just wanted to know if there's any update on the FDA interactions. Are there any remaining gating items for the Q3 FDA action date? The second question is a follow-up on Rystiggo. Just given the successful argenx launch of Vyvgart, can you set expectations for the early launch and provide more details on the potential reimbursement dynamics? Just help us set some expectations given ongoing payer discussions and potential timing of favorable policies. Thank you so much.
Yes, Stacy, thanks very much for the question on Bimzelx and the ongoing review by FDA. I'm not in a position to give you an update. We have confirmed to you that the active review is ongoing. You know, our policy, that we are not commenting with any further detail on that. I ask for your understanding. You know, that we have updated you when things changed a few weeks ago, we'll do so, but at this stage, we expect action by the FDA during the Q3 . Thank you.
Stacy, happy to answer the second component in terms of reimbursement dynamics. We expect majority of U.S. payers to continue to update their policies throughout now and the end of the year. We're expecting to have similar acetylcholine receptor positive policies to Vyvgart, and then possibly just a rider for MuSK indications, but actively engaging with our regional-level payers.
Okay. Thank you so much, Kim. I'm now asking a question for Peter Welford from Citi. He had to jump to another call. The first one seems to be for Sandrine. The first half EBITDA margin below 23, if we adjust for the considerable product disposal gain and Vimpat Japan milestone. As we look ballpark into 2024, how should we think about cost trends? Will R&D and G&A continue to be directionally down with selling and marketing spend rising? He wants to get a handle on whether total OpEx will go up or stay flattish.
Well, thank you. Do you have other question, Andrew? Shall I answer? Yeah.
No, no, go ahead. Go ahead.
Okay. Well, thanks, Peter, for the questions. I mean, as you know, Peter, we only give the guidance on 2024 in February next year. You know, overall, 2024 will be a year of strong investments. We'll support the launches, and at the same time, we'll benefit from the growth of our portfolio. We'll come back on that with more directionally the trends, when we are in, in February, but that's the overall framework.
Thank you, Sandrine. Kim, the next question is from Peter, is also for you. Any early feedback you can share on the Rystiggo launch and how you can use the fatigue data, given it was not included in the label? This is what he's saying. Kim?
Excellent. Early indicators, we are actively having patients enroll in our patient services program, which is under the Onward branding label. In addition, Fingers crossed, we will hopefully have our first patient infused today. In terms of the MGS Pro, really amazing scale. It's a patient-reported outcome that was created with patients and for patients. If you look at the types of information that is measured in there, while not in the USPI, it is consistent with our primary and secondary endpoints.
Thank you. The next question is coming from Graham Parry, from Bank of America, and he will be followed thereafter by Florent Cespedes, from Société Générale. Graham, over to you. Graham?
Hi, can you hear me now?
Yes, I can hear you now.
Great. Thank you. Sort of following from Peter's question, actually, just I know you don't want to give 2024 guidance, but you do have 2025 guidance. I guess what we're trying to establish is that obviously, if you have a heavy launch investment year in 2024, the shape of the margin recovery of about 700-800 basis points between 2023 and 2025, is that gonna be more back-end loaded into 2025? Do you still expect to see some margin expansion in 2024? Does the 2025 guidance assume any milestone payments or divestment gains similar to those that you've been seeing this year?
A question for Iris: does the argenx CIDP results make you reconsider investing in CIDP phase III Rystiggo given the apparent success of their study set? Thank you.
Let me start with 25. Graham, I think we've always said that, you know, the margin expansion in 2025 would be more back-end loaded. In that sense, that's really the effect of the operating leverage, benefiting from the growth of revenue and absorbing, of course, then, seeing the, the ratio of marketing and sales and R&D, decreasing as a % of revenue. Then to your question, whether we've built in this guidance on milestones, I mean, I think what I can say is that this type of milestones are typical of our industry. We have them, you know, almost every year.
I would consider this as part of our business, but we have not baked in the guidance in 2025, anything, related to that.
Graham, regarding our strategy and decision-making for CIDP as an indication, as you know, we have decided in 2021 that we would not pursue CIDP with rozanolixizumab. The decision was driven by the clear understanding that CIDP has a very heterogeneous disease pathology. We know that there is cellular immunity, T cells, B cells, macrophages involved. We know that autoantibodies play a role in certain patients, but they have only been identified in about 10% of the CIDP population as the causal underlying disease biology. With this very heterogeneous picture, we have decided to focus on autoantibody-mediated diseases, where autoantibodies are known or where there is promising evidence that they are the underlying reason. That's why we are currently focusing on diseases like MOGAD, autoimmune disease, like autoimmune encephalitis, and as of recently, fibromyalgia.
The ADHERE study that you quote does not change our assessment of the CIDP disease biology, because you see very clearly that you need a highly enriched, highly selective study design that focuses on responders to therapy to have a successful study outcome. No reason to change our strategy. Thank you.
Thank you, Iris. The next question is coming from Florent Cespedes, Société Générale, and he will be followed by Charles Pitman-King from Barclays. Florent, please go ahead.
Good afternoon, everyone. Thank you very much for taking my questions. 2 quick ones. First, on Bimzelx. Following the approvals in Europe for the indication, PSA and AxSpA, should we see a kind of an inflection point during the second half of the year on sales for these products? Knowing that on the IL-17, error indications are the main drivers, and if you could give us some comments on the recent launch. Second, question on inorganic growth. Are you still looking to acquire products or companies to strengthen your portfolio? Or are you fully focused on product launches?
If you could give us some color on that point, would be great, and notably in terms of areas and eventually in terms of size of the potential products and companies that you could look for to strengthen the portfolio. Thank you.
Yeah, Florent, thank you very much for your question. indeed, Bimzelx is now approved in the European Union for PSA and for AxSpA. as you know, the countries open up for those launches one by one, right? currently, we're launching in Germany, and we've seen a nice uptick in our sales starting second half of June when the product became commercially available. of course, you know, it is one country among the whole of Europe now, where we have 85% access in psoriasis.
I would say that at the level of a region, it will support accelerated growth, but I think the full impact will really be seen in next year and maybe even in the second half of next year, when all the countries that take longer for reimbursing new indications will come online. Clearly, the results in psoriatic arthritis in AxSpA are very positive. The differentiation is well understood, the early signs of the launch in Germany are very promising and really in line with what we're expecting. You know, of course, you know that UCB is established in rheumatology since a long time, we really are able to build on our existing footprint and reputation.
Maybe, Florent, for the second question that you had. I think you have a part of the answer in the way you formulate the questions, and particularly in the latter part, right. I mean, I think you see clearly that we have a very strong agenda from an execution standpoint and from a launches standpoint. Yes, the focus of the company right now is making sure that we are delivering on these launches, and the execution is doing as much as possible, just focusing on that. We would like to avoid distractions by inorganic program or agenda.
Having said that, we are looking in an opportunistic way, and just for you to keep in mind, the two maybe stream that we have looked at in the past, and that you have seen illustrations of that. One is ability to strengthen our pillar of expertise and the patients populations we are already in, in order not to complexify of add infrastructure, but complement what we have. You can see that, for example, with the acquisitions of Fintepla in epilepsy and or Ra Pharma and zilucoplan in complement of Rystiggo. The other pillar is early stage, early asset candidates, because we always, from a focus of innovation that we have, looking at pathways where we think we are expert in.
That's basically the two things that classically we are you looking at, but don't expect something in the near future, because the near future will be fully dedicated to executions and focus, and don't distract the organization.
Thank you. Next question from Charles Pitman from Barclays. He will be followed by Yifeng Liu from HSBC.
Hi, guys. Thanks very much for taking my questions. 2 from me. Firstly, on Cimzia, it's good to see sales holding up well there in the face of Humira biosimilars. I was wondering if you could speak partly to the pricing pressures you're seeing that, in that area, in the face of the launch of Adalimumab biosimilars, and maybe also just touching on any market intelligence you might have on the development of a Cimzia biosimilar. Secondly, just in terms of what the neurology strategy looks like for UCB, there's also an exciting pipeline of products that aren't necessarily public conversations we're having right now, leading out in 2024. How will Charl van Zyl 's departure impact your expectations? Thanks.
Thank you. Thank you, Charles. Let me start with Cimzia biosimilar. You know, what we're understanding right now is that there is a single agent that is about to start the early clinical work. We don't see an approval of a Cimzia biosimilar in the first markets worldwide before the end of 2026. That gives us a bit of a runway with Cimzia. In terms of the dynamics with the entry of multiple adalimumab biosimilars in the U.S., from a pricing point of view, it's not obvious that there will be a big impact just because of how the U.S. market works with the PBMs. So far we haven't really perceived a trend for special demands linked to these entries.
You know, I think on the contrary, you know, Cimzia is well established. We're growing by more than 10% in both rheumatology and dermatology. There's erosion in Crohn's, which is why the overall volume growth is 7% for Cimzia in the U.S. You know, that might erode by kind of low single digit percentage points with the entry of adalimumab biosimilars. It's kind of hard to forecast, but I can refer you to Europe and the rest of the world, where we have continued to grow, mid-single digits, or even in international markets, double digits, after the entry of both Enbrel and Humira biosimilars.
I think that the volume growth will most likely continue to be robust, and from a pricing point of view, perhaps some impact, but we haven't seen it yet. Thank you.
Charles, for your second question, first of all, let me tell you that, the departure of Charl is, of course, something that we have seen with a certain emotion, because it's always sad to see people who are in your team and who have joined the organizations to leave. On the other side, we are happy for him. You know, it's a great recognition of the value of UCB and our ability to develop talent and make sure that this talent are recognized. Of course, we wish him all of the best in his new adventure. In terms of strategy, my main comment would be: look, please see the strategy as a UCB strategy.
It's not really a UCB that you can divide by pillar or by therapeutic areas. Each of these different pillar needs to fuel and to build the overall UCB strategy. The UCB strategy always has been towards innovations and making sure that we are building excellence in areas where we feel that we can have a better chance than competition to find differentiated medicine. The expertise in science, in terms of modality, in terms of pathways, are critical, and it's true for neurology as well as for neuroinflammations, or neurodegenerations, or immunology. This is really how we are looking at this in the future.
My conclusion will be, please keep in mind, our objective is to continue to deliver differentiated patient product to patients suffering from chronic disease, in particularly in areas where we know quite well the pathways, and we can have an element of differentiation from a modality standpoint in areas where we can lead.
Thank you. Next question is coming from Yifeng Liu, from HSBC, and thereafter, I will read questions from which I got via the email. Yifeng, please go ahead.
Good afternoon. Thank you for taking my question. Two questions, please. The first one is, we've noticed that you are spending some CapEx on manufacturing, biologic, a new biologic unit and a new cell and gene unit. Could you give some color on how we should think about your strategy for manufacturing on the biologic side, going forward, you know, in terms of outsourcing and manufacturing in-house? The second one would be on the U.S. Inflation Reduction Act. How much of an impact do you think that's gonna have on UCB, particularly for, you know, small molecules and Bimzelx in the future? Thank you.
Thank you for the question. Maybe we'll start with the first one, and Emmanuel, I will leave you for the second one, about the U.S. In terms of manufacturing strategy and investment, two main elements that you need to have in mind. First, we want to develop internal expertise in areas of growth for the future. When we see areas where we want to invest, this is where in the future we want to keep the expertise internally. This is the reason why we have investing for infection, for example, for in mammalian manufacturing, to make sure that on Bimzelx and rozanolixizumab in the future will not be dependent only from external partners.
The second element is, we always want to have a network, for critical and strategic product, develop a strategy where we have backup or second source. Finally, for all of the rest, we are mainly dealing with partners and CMOs. Overall, we are building and leveraging for 70% of our manufacturing capabilities with external partners. External partnerships, dual sourcing and building and strengthening internal expertise for strategic assets.
Thank you. On the Inflation Reduction Act, I would say that, you know, we're still trying to really understand what it means longer term, but I could say that short to medium term, we see the impact as being modest. There's going to be some additional use in Medicare Part D that will be more than compensated for by some price erosion. You know, in terms of Bimzelx, we don't really see an impact before the next decade, so there will probably be some indirect effects at some point. But we don't see that in the next five or six years. In terms of our pipeline, as you know, we're heavily geared towards antibodies as a company.
Of course, we, we are concerned with the limitations that the Inflation Reduction Act may pose on the life cycle development in products indicated for rare diseases, where the kind of protection or the exclusivity doesn't extend currently beyond the first indication. For a company in that space, it's something we're watching closely. Overall, I would say that, you know, it doesn't represent a sea change for us.
Okay, thank you. I will now read questions from Xian Deng from UBS. The first one is on Bimzelx, asking if we would file Bimzelx for PSA AxSpA to see why we are waiting for PSO, for psoriasis, if we would consider using vouchers or something like this to speed up the other indications and when there could be the launches. The second question is: Could you elaborate about the erosion pattern for Vimpat and Keppra in the first half, and your expectations for the second half, please? I would say the first one is for Iris, huh?
Yeah, thank you, Antje. Of course, you can imagine that we have the supplemental Biologics License Applications for psoriatic arthritis and AxSpA, and now also HS, sitting ready. We currently believe that the fastest path for these indications to be approved in the U.S is to submit them immediately after or shortly after the approval of the original Biologics License Application for psoriasis. That's the current plan. We currently have no plans to use vouchers to accelerate the review process. A clinical supplement would be on a 10-month review period, that's what we are currently calculating. I would not feel comfortable to go ahead and give you an approval or launch date for the additional indications. As you know, we always take it one step after the other.
First milestone will be the action of FDA on the psoriasis BLA in the U.S.
Thank you. I think the question about the erosion patterns for Vimpat and Keppra is from Mike.
Excuse me. Sorry about that. Thanks for the question. First, let me reiterate J.C.'s and Sandrine's point, that the majority and the erosion rates for Keppra and Vimpat are mostly behind us. I think that's a good inflection point for growth. Second, after a slightly anticipated erosion rate, we see a much more predictable and stabilizing of the erosion rate as we go forward to second half. We definitely see Vimpat and Keppra in the second half, mostly predictable and stable. One thing to add to that is we do see great or solid growth rates in Japan and China for Vimpat, around 20%. Again, erosion's behind us, stable in the future, and good growth in the international markets of Japan and China for Vimpat.
Thank you so much, Mike. Next question is from Dominic Lunn from Credit Suisse. Asking on the Neupro U.S. generics, UCB lost the patent appeal in April, but sales are up in the first half with no apparent generic entry as of yet. Could you just update us on your current assumptions for timing of a generic entry and how this is reflected in the guidance?
I can take this one. On the Neupro generics, you're absolutely right. The patent, I mean, the Neupro today are currently out of patent. We can have a generic coming in the near future. We have integrated that into the update of the guidance for this year. The point of attention of Neupro, I would say, is that despite the loss of exclusivity, it is a patch, it is a transdermal system, which is not that easy is to produce and to manufacture. That's the reason why there is a certain uncertainty about the date of the arrival of the generic.
Thank you. Another question of Dominic, you asked about Cimzia biosimilars. I think Emmanuel has answered this one. In the interest of time, I'm moving to the next question from Gary Steventon, from BNP Paribas Exane. Can you confirm that there are no extensions to the PDUFA date for the FDA's review of Bimzelx and PSO, and that you don't currently have an expected target date for a decision? Iris, please.
Yeah, I can confirm that there has been no extension of the PDUFA date, and that we currently do not have an action date by FDA. Our estimate of the Q3 action that we have shared with you is based on our knowledge and experience of the process and the dynamics of the interaction with the agency. There has not been any official action by the agency. Thank you.
Thank you. Next live question from David Evans, from Kepler, followed by another question from Charles Pitman. David, please.
Thanks very much. Yeah, another question on margins, please, for Sandrine. The underlying margin in H1 was actually quite good, I thought. Even with minimal Vimpat sales, which is reassuring. For H2 , I was wondering if you could give any more color on what the increased in investment really is going on, and also going forward. I mean, you talk about increased spends on marketing and sales, but also R&D. Could you elaborate, is that any further headcount? Is this U.S. investment or is it ex-U.S? Ultimately, is it or is it more variable event-driven, kind of one-off costs?
Also on the, you didn't mention gross margin, in terms of kind of pressures in H2, and I can't really see reasons for any further gross margin pressure. Is there any reason to assume the gross margin to deteriorate in H2 or beyond? Thanks very much.
Thank you, David, for your question. On the margin, the expected margin in H2, what indeed, what I said is that we expect to see some increase in the second half of the marketing and sales investments. Think of it this way, I mean, as we're going to launch Bimzelx in the U.S., there are a significant variable investments. I think we have referred in the past with Emmanuel, and, you know, plan to do DTC, and this comes with quite substantial cost that we didn't have in the first half. As we also build the infrastructure or have built the infrastructure for Rystiggo, there's also a ramp-up effect for both Rystiggo and zilucoplan, which you do not see in the first half. That's definitely the line which is expected to increase versus H1.
Now, what I said to in regards R&D as well, is that we expect to see higher R&D in H2 versus H1. I mean, it's not different from our, you know, initial forecast. We had said that we were expecting for the full year R&D to be in line, in absolute level versus last year. I would say that this is not a difference. Now, as to the gross margin, I don't see either, you know, expected pressure in second half, you're right on this one.
Thank you very much.
Thank you. Next question. Short question from Charles Pitman-King.
Hi, thank you. I just wanted to come back to Bimzelx, and just ask if you could provide any insight, Emmanuel, into how you're thinking about the commercial opportunity by indication. Thank you.
Clearly, the psoriasis market is huge, and you've seen that we are really on our way to leading the IL-17 segment in dynamic share in psoriasis, and typically, that segment's 25%-30% of the market for new and switch patients. We see psoriasis as the largest indication with Bimzelx. We recognize there's competition there, but I think that where we are today, where we're launched, we really are able to take share, and we see that growth continuing. Next may well be HS. You know, clearly it's not a large market today, but it's a market where that will expand rapidly and where we'll have only three players for the next five years or so.
We would see a high share in a fast expanding market. AxSpA and PSA, taken together, should be around the level of HS, maybe a little larger if you put them together.
Thank you, Emmanuel. Please stay on, because, I have a question from Kerry Holford from Berenberg. For Cimzia. She says, "I think you referenced an inventory impact on Cimzia in Q2. Can you define this amount?
Yeah. Thank you. You know, it represents the majority of the difference between the volume growth of 8% and the value growth of 2%. It's really a, kind of, first half 2023 effect that's driven by both the U.S. and Japan. In Japan, we have a partner. In the U.S., it's just a little higher inventory at the end and a little lower now. You know, it's transitioning, but if you think about the whole year, I think, you know, we're gonna maintain a gap between value growth and volume growth, as has been the case in the past, and some of it will be net price erosion.
Maybe also to complement the question that Charles asked earlier, the ASP price in the U.S. for the lyo formulation continues to erode. I mean, that's just mechanical. That's gonna cost us a little bit continuously as we look forward. You know, hopefully, that detail helps you with the modeling. Thank you.
Sandrine, very last question from Kerry from Berenberg. On the 2025 outlook, when Bimzelx is not approved in the U.S. in Q3, what would happen to the guidance in 2025?
Thanks for the question. The guidance that we have, which is unchanged for 2025, is with the expectation of FDA action in Q3. We have always said that our guidance was built on a series of different scenarios with, you know, potential different timing of launches, different launch trajectories. Of course, if the question is, are there scenarios where the guidance in 2025 would not be supported anymore? The answer is, of course, yes, but that's not the case, and that's why it's unchanged as we expect the FDA action this quarter.
Thank you very much. It's at the top of the hour. I respect everybody's time on a very busy day, and we have come to the end, at least of all new questions. Graham, happy to connect after the call with you, and I'm thanking everybody for your time, your interest, your questions, your answers, and wish you a great day and a good summer. Take care.