Earnings Call: H2 2018

Feb 28, 2019

Ladies and gentlemen, welcome to the UCB conference call. For the first part of this call, let me remind you that all participants will be in listen-only mode, and afterwards, there will be a questions and answer session. If you wish to ask a question during the Q&A session, please press the code 01 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. Please note that this conference call will be recorded and that a replay of the webcast will be available later today on UCB's website under the investor section. I am pleased to present Ms. Antje Witte, Head of Investor Relations, who will be the moderator of this conference. Ms. Witte, the floor is yours. Thank you very much, Philippe. Good morning from my side as well, good afternoon, and good evening. Welcome to the full year results call of UCB. This call and the following question and answer session is covered with a disclaimer and safe harbor statement, which you will find on page 2 of our presentation. The presentation you find also on our website in the investor relation section. We have for you here to present to you and answer your questions, Jean-Christophe Tellier, the CEO, Iris Löw-Friedrich, our Chief Medical Officer, and of course, last but not least, Detlef Thielgen, our Chief Financial Officer. We have also Jeff Wren here as well as Emmanuel Caeymaex, who will answer your questions around immunology and neurology division. I would like to hand over to Jean-Christophe now. Thank you, Antje. Good morning and good afternoon, good evening, everyone. It is a pleasure to welcome you at our full year results conference call. As you have seen in our press release and in the title of today's, we are pleased with our results of 2018. It has been an additional good year for UCB and actually a fifth consecutive year of profitable growth that build a solid foundation for future growth. When I am thinking about the achievements of 2018, let us get started with some significant progress that we have made towards our patient value strategy. You know that we aim to better connect the patient to the science in order to discover more differentiated medicine that then we connect back to the patients. Differentiation is a key word for us as it is the trigger to provide clinical outcome and new differentiation for the patients as well as possible best experience for the patients. You have here a few examples of progress that we have made in 2018. I will not go through all of them, but I would like to comment just a few of them. When we think about better connecting the patient with science to have differentiated hypothesis, let me start with bimekizumab. You know, and Iris will comment more on bimekizumab, but bimekizumab has been specifically designed to completely block twin cytokines, IL-17A and F, which up to now have never been able to be targeted with the same molecule. That leads to potentially a better clinical outcome. The second example that I would like to illustrate from these patients to science connection is our anti-tau antibody, UCB0107, which has a potential to be a disease-modifying therapeutic for PSP, progressive supranuclear palsy. This product has been designed from patient's material. If you move down the slide up to the better connections between the solution and the patient, two examples that I would like to illustrate. First is midazolam. The nasal spray will provide a new, and I think well expected solution for patients with acute repetitive seizures that today have not an ability to be comfortably treated where they suffer from this disease. This is an addition that we got from Proximagen, and that we acquired last year, which is a natural addition to our current portfolio. Last but not least, I would like to highlight is the additional indication of Cimzia for rheumatoid arthritis. Our update label confirmed that even if the product is on the market for now multiple years, we have been able, thanks to the design of the molecule, to demonstrate unique differentiation for patients. Yes, indeed, the patient value strategy tends to provide differentiation, which is for us the reason for belief in continuous success moving forward. I mentioned that 2018 had been a good year for us. This was our objective at the beginning of the year, and you can see here that we are pleased with what we have achieved in 2018. We wanted to maximize our core portfolio growth. This has been achieved with now a 10% growth at constant rates for our core products that are reaching EUR 3.8 billion. They represent more than 82% of our revenue today. Two, we wanted to further advance and prepare the launches of our late-stage portfolio, and here also, 2018 has been a year of significant progress. You have seen earlier in January the approval in Japan for Evenity that we are very pleased with, and we continue the process in the U.S. and in Europe. We have filed also midazolam, our newest acquisition in our epilepsy portfolio in the U.S. The phase III program in psoriasis for bimekizumab is now fully recruited. Not only we have made significant advancements in our late-stage pipeline, we have also progressed earlier stage pipeline, and Iris Löw-Friedrich will comment on rozanolixizumab with the proof of concept in ITP and the myasthenia gravis. You have seen also earlier this year the proof of concept of dapirolizumab pegol in lupus and our anti-tau I just mentioned in human. We wanted also to continue our focus on our key growth and core capabilities, neurology, particularly epilepsy and neurodegeneration, as well as immunology. You can see here that we have also progressed for creating even more focus. The spin-off of Syndesi, where we funded this new company with one of our assets, SV2A modulator, who have potentially some cognitive property, but not really in our focus. Syndesi was created with these assets in 2018. We have acquired also midazolam, I mentioned it, and Element Genomics to strengthen our research engine. Last but not least, Detlef Thielgen will mention that, and we come back of course of that, we have achieved our 2018 financial outlook. Yes, for 2018 we are very pleased, and as I said, our focus is on immunology and neurology, and particularly neurology. You have here a few illustrations of our leadership in epilepsy. I would just mention three of them. First, the most important one is, of course, the numbers of patients that we are able to reach all over the globe. You see here almost 3 million patients who use Keppra, Vimpat, or Briviact. I mention also the new launches of midazolam that will happen this year. I would like also to mention the new indication and the innovation that we continue to push in epilepsy. The extrapolations and usage of advanced analytics to get new indications not only provide us an acceleration in the ability to get new indications, such as monotherapy or pediatric indication for our drugs, such as Briviact and Vimpat. But it is also a significant value for the patient who do not have to wait until the clinical trial are done before getting access to new solutions. padsevonil will be commented by Iris, so I will not comment more on this one. Definitely the fifth year of growth, you see here the numbers. If you remember, in 2014, we had the sales of revenue of EUR 3.3 billion and a REBITDA of EUR 609 million. In 2018, we have been able to reach sales of EUR 4.6 billion and a REBITDA of almost EUR 1.4 billion. So a significant growth on both and particularly on the profitability. These growth have been the results of our core product that you see on the right-hand side of the slide, and the dotted line is this magical line of the blockbuster status. So we are also pleased in 2018 to have an additional blockbuster in our portfolio with Vimpat, who have reached almost, let us say, EUR 1.1 billion this year, and the continuous growth of Cimzia, which have reached EUR 1.446 billion this year. We are now entering in 2019. 2019 will be for us the first year of a new cycle that we have named accelerate and expand, and this is what we want to achieve starting to this phase. First, we want to continue to maximize our growth and increase the numbers of patients who are positively impacted by our key products. Two, we want to expand the patients population that we are able to treat with new products, such as Evenity post-fractural osteoporosis or midazolam for acute repetitive seizures. But also continue to expand our new indications with our established products such as Cimzia, with the new label of non-radiographic axSpA that we expecting in the U.S. this year. Finally, we need to continue to advance our pipeline, late stage with confirmatory stage for bimekizumab, rozanolixizumab, padsevonil, and getting the phase I-B outcome for the anti-tau, and continue to enrich our pipeline with new populations with our early pipeline, as well as looking for opportunistic external potential additions to our portfolio or our discovery engine. We want to continue to invest, that the reason why we are aiming to reduce a little bit our profitability in this year. But we have planned and commit to go back to more than 30% and actually 31% in 2021. This is what we have shared already with you last year. My closing slide before handing over to Iris is on translating this solidity and the growth that we have been able to achieve and delivered over the last five years to bridge to a confidence in the future and in future growth with this ability to potentially launch six products in the next five years. I have mentioned them during the short presentations. You have them here on the right-hand side. romosozumab, Evenity, midazolam, Nayzilam, bimekizumab, rozanolixizumab, padsevonil and anti-tau. It is not only six potential products that we will be able to launch in the next five years. It is 10 new patient populations that may benefit from this solution. That is, I think, the best way for me to close this part of the presentations, to give you strength and confidence in our future with this potential solution for new patients. Now I am pleased to hand over to Iris for the more illustrations of this pipeline. Yes. Thank you very much, Jean-Christophe, and hello to everybody on the call. It is my pleasure to walk you through our late-stage pipeline, which is, of course, the foundation for the anticipated successful launches that Jean-Christophe mentioned. I would like to share in our courageous clinical approaches that come with very novel design ideas, and that are all set up to demonstrate the differentiation of our assets based on very clear patient value propositions. This is a view of the pipeline, and I will focus today on romosozumab, Evenity, bimekizumab, Nayzilam, and rozanolixizumab. I will not comment on midazolam nasal spray, which is in the final stages of regulatory review in the U.S., and I will not comment on our rich phase I pipeline. I just want to assure you that the assets that we are developing early stage are all designed with excellent science as the foundation and with the ambition to demonstrate future differentiation and to meet future unmet medical needs. We have a very busy and exciting year ahead of us, as you see by the anticipated news flow. Again, we will touch on most of these items going forward. The anti-tau project will read out its phase I results more towards the end of the year. Not for today, but more discussion of this molecule at a later stage. Now let us jump into the late-stage pipeline, and let us start with Evenity romosozumab. I would like to remind all of you that by blocking sclerostin, Evenity is a bone-forming agent that has two mechanisms of action. On one side, it increases very potently bone formation, simultaneously, it reduces bone resorption. These two mechanisms result in increased bone strength and bone mass, both reduce the risk of fragility fractures. We have talked very often in the past about the burden of fragility fractures to individual patients, their families, and society, requiring surgery, prolonged rehabilitation, loss of independence, eventually nursing home stays, and death. I also want to remind you of the very compelling efficacy that we have shown together with our partner, Amgen, for Evenity. I want to remind you that we have conducted the first ever regulatory study that has demonstrated superiority of Evenity over standard of care alendronate on all fracture endpoints. Just a moment to remember that. Yes, we are all conscious of the potential cardiovascular risk that was observed in one of our phase III studies, and we are working very diligently with regulatory authorities around the world to establish the proper benefit-risk assessment and to reflect this adequately in our labels. You have seen that the new year started with the approval of Evenity in Japan. I think you have also witnessed our successful advisory committee to FDA, where 18 out of 19 members voted in favor of approval of Evenity, of course, with appropriate post-marketing requirements. So again, we continue the final path with FDA. We continue the regulatory processes in Europe and in other geographies, and we will keep you posted, most likely in second quarter this year on the progress. With this, I would like to move over to bimekizumab, our antibody targeting IL-17A and IL-17F. When our researchers evaluated the relevant IL-17 cytokines, they very quickly found out that not only IL-17A is relevant, but that there is paramount importance of IL-17. They have established the evidence that both cytokines, IL-17A and F, are not redundant, but that they have similar pro-inflammatory functions, and more importantly, they also synergize with other cytokines, altogether amplifying the inflammation. So it's very obvious that when a molecule blocks both cytokines, that this blockage should result in enhanced efficacy. Actually, we have been able to demonstrate this more complete clinical response in our phase II-B results. You have seen these before, so just take this slide here as a summary. We have investigated bimekizumab in three patient populations, psoriasis, psoriatic arthritis, and axial spondyloarthritis. All of these three programs have several components in common. First of all, we have used endpoints, clinical trial endpoints, that are way more ambitious than usual clinical trial endpoints in these diseases. We have done this consciously because we wanted to illustrate from the beginning that we have a high ambition for differentiation, and that we trust in bimekizumab to be able to deliver a differentiated solution for patients. Across all of the three patient populations, we have seen a steep early increase and onset of efficacy, and we have seen sustained efficacy all across. So a very exciting value proposition that we have confirmed in phase II. Let me walk you through the challenges of the individual patient populations. People suffering from psoriasis suffer from a systemic disease, but they bear the symptoms of their disease on their skin, very visible to the outside world. It is red, scaly, itchy, painful skin disease that really comes with a lot of social stigma, and it comes with a lot of isolation and emotional burden. Imagine if a lot of your skin is covered with these disease symptoms, and if you then have the opportunity to get almost clear skin. What we have seen in our phase II study is that as evidenced by PASI 90, which means almost clear skin, the vast majority of patients, actually up to 80%, have achieved this goal. I just want you to imagine what this does to the emotional burden and the feeling of isolation of patients. They are ultimately able to revert back to normal social and working life. We have shown you here the 12-week results. We are releasing this week the long-term study results, which are so promising that the American Academy of Dermatology has given them a late-breaking oral presentation. Let's move over to psoriatic arthritis. About 30% of patients with the skin disease psoriasis also suffer from a very painful, quite debilitating joint disease called psoriatic arthritis. Very often, the disease starts with skin symptoms. Sometimes the disease also starts with joint symptoms, and it is very difficult to predict what the evolution will be. The real dilemma that patients and physicians are faced is that no medicine that is currently available does equal justice to the joint disease and to the skin disease. Patients and their treating physicians almost have to make a trade-off whether they take particular care of the joints or whether the skin is the priority. Again, based on what we have seen on the efficacy of bimekizumab in psoriasis and based on the data here in psoriatic arthritis, we are convinced that bimekizumab bears the potential to be this medicine that does equal justice to joints and skin for patients with psoriatic arthritis. Then, of course, we have also looked into axial spondyloarthritis, the inflammatory disease of the spine, which burdens younger patients in the middle of their social and working life with very serious pain of the spine and the loss of function. Again, we have chosen a very high threshold here of ASAS 40, and we have seen almost 50% of patients showing a dramatic response. All in all, the story of bimekizumab is very intact with the original scientific hypothesis, and based on the evidence that we have generated in phase II, we have designed a quite bold and courageous phase III program. We are running currently three studies in psoriasis in phase III. These studies are fully recruited, so we will have results from these studies in the fourth quarter of this year. These studies compare bimekizumab with the aim to be superior for bimekizumab. They compare bimekizumab with the current standard of care, adalimumab and ustekinumab. When you talk to payers, when you talk to physicians, these are very relevant comparisons in their mind. We have also started a phase III-B study in psoriasis, and we have deliberately started it a little bit later. Here we are investigating the superiority of bimekizumab over secukinumab on the hardest endpoint that you can imagine, namely complete clearance of the skin, PASI 100. We will deliver the results of this study in time for approval and launch in the third quarter of 2020. The phase III program for psoriatic arthritis and for axial spondyloarthritis is designed under the aspect to bring the molecule as fast as possible to patients. Again, we are comparing here with adalimumab, which is currently the most potent TNF blockage, is currently the most potent principle for the treatment of the joint disease. We will then take the entirety of evidence that we have from the psoriasis program, from this phase III program, to design a phase III-B that will include all of the then-relevant competitors. A similar approach is what we have taken for axial spondyloarthritis. Again, both programs are due to start in the second quarter of this year. Now let's move on to epilepsy. padsevonil is our newest antiepileptic drug that we want to bring to patients, and it is designed with a dual mechanism of action. padsevonil has a very high and selective affinity for the presynaptic SV2 proteins, and it has a moderate affinity for the postsynaptic GABAA receptor. Again, designed to deliver utmost efficacy with a good safety profile. We are developing padsevonil in patients with focal epilepsies with very high unmet medical need. When you look at the definition of drug-resistant epilepsy that the International League Against Epilepsy has issued, you'll find the definition that says drug-resistant epilepsy is the failure of two anti-epileptic drugs that have been used adequately, either in monotherapy or in combination. Here we are recruiting patients who have failed at least four anti-epileptic drugs and who still have a significant seizure burden. Again, we have given ourselves a very high hurdle of efficacy because in this drug-resistant population, we want to show at least a 75% reduction in seizure frequency. We have achieved that already in our phase II study, where we recruited patients with at least four seizures per week, and where 30% of patients were a responder, 75% responder, versus only 11 on placebo. This has given us the confidence to go into a large phase II-B and III program that will recruit about 900 patients. We have taken an approach to not wait for the phase II-B results before we start phase III. We have trust in our dose selection, and we know that with this staggered approach, we can save many months to bring this molecule earlier to patients. We expect to have initial results in first half of 2020, and we expect to have the results from the second study in the second half of 2021. Again, I hope you see that this is the continuation of our deep commitment and legacy to serve patients with unmet medical needs who have to live with epilepsy. Moving on to rozanolixizumab, which is designed to block the activity of the neonatal Fc receptor and thereby accelerate the catabolism of IgG antibodies. Of course, that includes autoantibodies that can be the source of severe diseases. Thereby, we believe that rozanolixizumab has the potential to become a life-changing treatment for patients with a variety of autoimmune diseases. Patients are currently dependent on quite cumbersome treatment regimens. They either have to be hospitalized for many hours and several days of IVIG infusions, or they have to undergo plasmapheresis, or they have to live with high doses of corticosteroids. Rozanolixizumab has already demonstrated efficacy in our phase II program in myasthenia gravis and in immune thrombocytopenia. It is readily available as a short subcutaneous infusion that can also be self-administered, if so wished by patients. What we are also trying to achieve with the rozanolixizumab development program is on one side, relief from relapses. When patients have an acute exacerbation of their disease, rozanolixizumab will provide an opportunity for treatment. But we also want to relieve patients from having to live with fear of the next relapse, and we try to develop also a maintenance therapy with rozanolixizumab that will allow patients to be well-maintained and to live a normal life without fear of the next relapse. We are progressing the development programs in myasthenia gravis and immune thrombocytopenia to confirmatory stage. The confirmatory study for myasthenia gravis will start in second quarter this year. The confirmatory study in immune thrombocytopenia a little bit later, more towards fourth quarter this year. Every day now, we will start the phase II study in CIDP, chronic inflammatory demyelinating polyneuropathy. We are enrolling roundabout 40 patients who have, over the last 18 months, been dependent on immunoglobulin therapy. We are treating these patients for about 12 weeks, and we are taking well-established endpoints to see and demonstrate the efficacy and safety of rozanolixizumab in this patient population who are heavily suffering from their neurological disease. So a very comprehensive program that will allow us to demonstrate efficacy of rozanolixizumab across a number of autoimmune diseases. With that, I am very conscious of the fact that all of this needs to be paid for and requires heavy investments. I hand over to my colleague, Detlef, who handles our finances. Yeah. Thank you, Iris. Listening to Iris, I was thinking to myself, do you prefer to be before the pipeline and in the way of something, getting to something exciting, or do you prefer to be after the pipeline discussion when it is difficult to get more excitement up? So I will give my best at least. I would like to present to you the financials for 2018 as well as the outlook. I think, also, you commented from what I saw, that 2018 really delivered very strong results, and I think that is fair to say when both on revenue and core EPS, we were going beyond our guidance, and were on for REBITDA, on the high end of our guidance. So I would subscribe to that. Looking a bit more in detail to qualify the results a bit. What is important to say on revenue is that this revenue growth really has been driven by our core products, which have been able to have a 6% increase year-by-year. Having in mind. Oops. Thank you. I am not so good with my technology. I will have to ask my CIO to train me up. Anyway, I am coming back. The results are still very good. They are still very strong and revenue also is still driven by the core products. What is more to say to revenue is, when you look a bit more into detail, you for sure have seen that in 2017, there was quite a substantial amount of other revenue which did not repeat in 2018, which makes this increase of 5% even much stronger because the underlying, the non-one event growth is really strong. We have been helped a bit by some positive hedging, and you know that we always give you a guidance that includes all the hedging and, in 2018, we benefited from some very smart hedging that took place already in 2017, that helped us to deliver these very good results on the revenue, but also on the recurring EBITDA. When we look to operating expenses, I am very pleased with the cost management that we have shown. We already told you that we would deliver less profitability, especially when the phase III studies will be in full swing. I am very happy to say that the second year in a row, we were still able to keep the 30% threshold in terms of EBITDA to revenue ratio, despite a 10% increase of R&D and despite some investment into new launches of different indications that we had. That I really was very pleased to see again that G&A costs were dropping and also efficiencies have been taken into account and also shift of investment. We talk about new for later a bit, has been taken to really drive these positive results. When we look into recurring EBITDA, we talked about the strong number that we delivered, and I am very happy about that. Profit of the group, I think, for the first time is higher than EUR 800 million, and we are quite happy with this because as you know, this is really also telling you about cash coming to the balance sheet, and cash is important to keep financial and strategic flexibility. Core earnings per share were more or less on last year's level, mainly due to the fact that we had lesser non-recurring costs than the year before. We are on a very nice level, which also, as we will see, is allowing us to propose a higher dividend. Looking into the products themselves, the most important thing to mention here is that our core products are now 88% of our net sales. As you might remember, we are divesting opportunistically when the price is right, and this is usually 1%-2% of our revenue, which you might also want to keep in consideration when you look at the top line performance year-by-year. Jean-Christophe already alluded to the very strong growth trend both on revenue and on recurring EBITDA. Having in mind that we had at least EUR 100 million more spent in R&D, you could see how good the underlying profitability really is that you can still then make a slight increase in overall profitability year-by-year. Coming to 2019 and the midterm guidance. As we mentioned already last year to you, we would be dropping a number of percentage points in terms of profitability and revenue, due to the factors that I mentioned before, is again including all the FX, which this year is less favorable than the years before. All the divestitures that we have been made and potentially will be making is already taken into consideration. Therefore, the revenue guidance is between EUR 4.6 billion and EUR 4.7 billion. I would like to point out that there is continued strong growth of the core products, which you also hopefully feel represented in what we discuss later, the upgrade of the longer-term guidance. The REBITDA is between 27% and 29%, and after we mentioned last year already that we would drop a few percentage points, and I felt that it would be helpful to be very clear on what this means. We have given you this time a percentage of revenue REBITDA guidance so that it's easier for you to follow that in your models. This is based on our assumption that our R&D expenses will go up again. Now we estimate 27% plus minus one point. I might remind you that this year was 25%, and we achieved also that guidance quite to the point. The year before it was 23%. So we have been making quite significant progress in terms of the underlying profitability to be able to keep the REBITDA at this level. That translates just more or less one-on-one into core EPS, where we now give a guidance of EUR 4.4 to EUR 4.8 a share. I like to point out that the tax ratio will be reasonably consistent with this year, around 20%, which is compared to a few years ago, also a very nice improvement that we can show. Looking into the midterm guidance, it's very clear that we will stay and confirm with our guidance for 31% of REBITDA revenue ratio for 2021. I now come to our upgrade of our peak sales. I start with Vimpat, which now is more than EUR 1.4 billion. You remember it was more than EUR 1.2 billion in our last guidance. I'd like to then move to Cimzia, which is now more than EUR 1.7 billion, and I know that this will be an important reference for you to see our confidence in this product, as the consensus was showing quite a significant difference to our own expectations to the product. With that, we have been investing more into these two products and have shifted investments away from Neupro as we could reach more patients in these other products. Therefore, we feel that Neupro has probably reached somewhat a plateau, with small volatility going forward, which we feel is very positive and will contribute very nicely to our profitability going forward until loss of exclusivity. Last but not least, Briviact will stay with its old guidance, more than EUR 600 million. I would just like to point it out, if you did not calculate it yourself, that our old peak guidance for CVN has now increased to EUR 3.4 billion instead of EUR 3.1 billion. So really very nice achievement. Perhaps one thing that I would like to mention, so that we do not have surprises going through the year, we will change a bit the way that we are reporting. We will not report quarterly top line anymore, because we have gotten the feedback that this information is available also through other sources, and therefore, it was not seen as relevant. We feel that what we started already in last quarter, that a bit more event-driven communication when questions come up, either to results of clinical trials or other developments within our business, would be more helpful to you. Therefore, we go this pathway, which will also, I think, eliminate a bit of the uncertainties that the volatility between individual quarters have always created in terms of understanding the underlying performance of the products. With that, I think I can close out the segment and hand over back to Jean-Christophe. Thank you, Detlef. Thank you, Iris, for this overview of the pipeline and of our financial results. So just to close before opening the Q&A session. Once again, we are pleased with the results of 2018. We have achieved our fifth consecutive years of profitable growth, which have created a solid platform and a strong foundation for our future growth. I would like just to close with this slide summarizing the six potential launches that we are expecting in the next five years, which may create value for the patient living with these different diseases. If you look at them, it is already 10, as I mentioned earlier, 10 different patients population that we are aiming to reach out thanks to this maturity of the pipeline and these potential launches. With that, I would like to open the session of the Q&A. Thank you. Thank you very much. Thank you. Could we please, Philip, open the question and answer session? Absolutely. Thank you. Ladies and gentlemen, we will now begin our Q&A session. If you wish to ask a question, please press the code 01 on your telephone keypad and you will enter the queue. After you are announced, please ask your question. Once again, please press the code 01 on your telephone keypad to ask a question. We have a first question from Richard Parkes from Deutsche Bank. Please go ahead. Hi. Thank you very much for taking my questions. I've got three questions, but I'll ask them in turn, if that's okay. First one for Detlef. Just wondered if you could help us to understand what your revenue guidance implies in terms of CER revenue growth, and help us understand the hedging. Because you've said that FX is less favorable, but I've got FX being a positive tailwind in 2019. So is what you're saying is that we need to factor in some negative revenue from the hedging this year? So that's the first question. Oh, I am happy to go already on that one. Let me explain a bit how hedging works for us. We are hedging in advance of the years that we are providing guidances for, which does mean when I provide a guidance today, I have hedged already through the entire year before. Which does mean that actual rates that you might take into consideration or just taking the sales that are coming out of the year before, multiplied by the implied growth rate, are not giving the same result than what we have. And what happens with that is two things. For a certain possibility to give you credible numbers, because we already know rates we will have to apply. It also means that you have, depending on the volatility of the FX, between the years you can have plus or minuses. Last year, we hedged very early and for very favorable rates already. There was a positive impact on that, as this is not the case here because our overall hedging is less favorable than it was in last year and has probably a 2%-3% impact on the top line. Therefore, I think looking at what we are guiding and what consensus was displaying, it looks to me like explains very well the disconnect here, but it is very natural as you cannot see that. The same is true for either discontinued or divested assets that you also cannot see. In that regard, keeping in mind my 1%-2% per year that was happening quite regularly is perhaps something that you might want to consider going forward. Okay, perfect. That is very helpful. Thank you. A second question was just wondered if Iris could clarify, and I might have missed what she said around the design for the CIDP phase II study. Did I interpret that correctly, that is this going to be a study where you are recruiting patients that are on IVIG and then looking at whether they relapse when they have switched on to rozanolixizumab? So that is the next question. Maybe you could talk about what has allowed you to accelerate initiation of the phase III trials as well. I think previously the myasthenia gravis study was second half, now it is second quarter. Yeah. Thank you, Richard, for two very good questions. So let me repeat the design of the CIDP phase II study. Again, please keep in mind it is a proof of concept study and CIDP is quite a complex disease also in terms of pathomechanisms. So, our intent is to recruit roundabout 34 patients who have required IVIG treatment before. We have said the last 18 months. Because this is the patient population that we want to address in the first instance. We recruit patients after they have received their last IVIG treatment and then continue on with rozanolixizumab. It is weekly subcutaneous infusions for about 12 weeks. Again, we are using standard endpoints for the disease. We found that this is a very appropriate and very elegant solution to find the patient population that will benefit most from rozanolixizumab in this proof of concept setting. Your question on the acceleration of the MG Phase III program. We have, as usual, worked diligently through regulatory input. We have worked diligently through payer input. We have worked very diligently with patients on the design of the study, and we had clarification of our questions very early. We have a very clear concept, and now we are ready to go. No magic, but only a very engaged team working in a very networked way, bringing all the stakeholders together and giving us confidence that we have the most appropriate study design. Okay, perfect. Thank you very much. My final question is just a broader one. In terms of the proposal to remove the safe harbor on rebates in U.S. Medicare, I am just wondering what impact that might have for you and in particular your Cimzia and potential bimekizumab franchise, given that both those you are going up against established incumbents with much larger market share. I am just wondering if that would be positive or negative for you. Thank you. Thank you, Richard. Emmanuel here. Any trend in the U.S. moving away from scale and volume towards value is a positive for us. Our products tend to be well-differentiated clinically, and it is actually something we observe with higher shares in Europe than in the U.S. with the same products. I think the difference is the rebate wall, as some call it. I would assume that this would be a positive. The other thing I would say is that currently the net price of Cimzia is lower than branded TNF competition, which also means that in a system where value for money matters, this should be a brand that could benefit market share-wise. Perfect. Thank you very much. Our next question is from Michael Leuchten from UBS. Please go ahead. Oh, thank you for taking my questions. Three, I will ask them in one go. First one on Cimzia in Europe. Just wondered if you could talk to the early experience in the market, given biosimilar competition elsewhere in the TNF alpha group. A question for Iris Löw-Friedrich on rozanolixizumab ITP. I thought we were waiting for a high-dose cohort out of the initial study. Just wonder where that is. Are we still going to see that, or have you made up your mind about dosing in ITP, given you have put a date on the start of the trial, on the confirmatory style trial? Then thirdly, on bimekizumab, just wondered if at any point you would consider going head-to-head with another IL-17A, given your optimistic view of the IL-17A and F targeting. Thank you. Thank you. Perhaps I will start with questions one and three. So with regards to the experience with biosimilars of infliximab, etanercept, and adalimumab in Europe, perhaps a few facts first. Today, about half of the Enbrel etanercept volume is biosimilar in Europe a few years after launch. Yet the share of the molecule itself has not really increased. So payers are focused on switching patients from brand to biosimilar. The same is actually true for infliximab, where that rate stands at about 60%. If you now look at the impact on Cimzia, you will have seen in the document that our market share is stable, if not slightly increasing. That is mostly in the segment of patients where Cimzia is most differentiated, which are women of childbearing age. Of course, with adalimumab biosimilars coming along, we see the payers reacting more quickly. So the erosion that has been observed over the first few months in Germany, for example, with adalimumab, is way faster than with etanercept. However, it does not really impact Cimzia in a way that is dramatic. We have actually modeled how Cimzia would grow without biosimilars, and it would probably grow by about 5%-10% more. About half of this is volume, and about half of that are rebates or discounts we need to give to be able to continue to be competitive in segments where that is possible. So net-net, I do think that our business in Europe is in good shape, that we will have the opportunity to grow incrementally, not only with the increasing the women of childbearing age segment, but also with our launch in psoriasis, which will start kicking in this year in Europe. In terms of bimekizumab, Iris presented three phase III studies, out of which two have an active control, superiority studies. She also mentioned that there is a study comparing bimekizumab with Cosentyx, secukinumab, and that is an IL-17A. The measure that we will use to demonstrate superiority is PASI 100, meaning completely clear skin, because that is what the majority of patients want, and that is the long-term goal that is now feasible with agents like bimekizumab. As Iris mentioned, the results will become available by Q3 next year which will be well ahead of our launch time, which would be scheduled the year after if everything goes to plan. Thank you very much, Emmanuel. Michael, thank you very much for your questions. You had asked around immune thrombocytopenia and the connectivity between the high doses that we are still exploring as an extension of our proof of concept study and the firm statement about the start of our confirmatory study. You are absolutely right. We are continuing to explore high doses in ITP as an extension of our proof of concept study because it is always helpful to understand how far can we go and what is the efficacy and safety profile of higher doses. We do not need these doses for the development program, so this is just to learn as much as we can, because we know from the phase II results with the lower doses, and we know from very sophisticated modeling approaches that we have in our hands, that we can achieve the target efficacy with the doses that have already been tested. We try to combine the best. We move forward as quickly as possible with the program into confirmatory phase, and we learn as much as we can from the proof of concept study. Thank you. Our next question is from Richard Vosser from JP Morgan. Please go ahead. Hi. Thanks for taking my questions. Following up just on ITP, first of all. Sorry, on the CIDP trial for rozanolixizumab. Just with 34 patients, I think CIDP is a pretty heterogeneous disease. So how are you going to sort of test various subgroups within CIDP? How are you going to choose the patients? That's the first question. Second question, just on following up, I think, from Michael's question on bimekizumab head-to-head versus Cosentyx. I thought one of the elements of differentiation of targeting the F form of IL-17 was the effect on joints compared to the skin. So why not go head-to-head in the psoriatic arthritis straight away against Cosentyx, with adalimumab being superseded by Cosentyx? Then final question just on Evenity. Clearly coming out of the panel, it seems like you proposed or Amgen proposed a black box warning for CV risk on the label in the U.S. So just in your preparation for market, what feedback have you had from doctors and KOLs around that labeling and where they think that they'll actually use the product? Thanks very much. Yeah, thank you very much, Richard. Excellent questions. First of all, on CIDP and the patient population that we want to recruit, keep in mind we're talking about a proof of concept study. So round about 40 patients, you mentioned 34 is an appropriate sample size. We will test one dose of rozanolixizumab versus placebo. So we'll have relatively small groups per treatment arm. As you rightly said, CIDP patients are very heterogeneous, and it would be not really helpful and productive trying to stratify in a relatively small study that actually should prepare us for larger scale development and should prepare us for the reality of the disease. So we have avoided the dilemma that you sketched out by saying we take patients who have been in need of IVIG before, because these are the patients that will most likely benefit from rozanolixizumab. It goes without saying that in such a small study, we will do all kind of biomarker work. We will look into all kinds of antibody panels. We do not think that it would be prudent to use those as inclusion and exclusion criteria. That is the simple explanation for how we got to the patient population that we have chosen. Then on the head-to-head trial against secukinumab, I want to reiterate that we understand and recognize the huge unmet medical need in psoriatic arthritis, where there is no treatment available that really serves the joints and the skin equally well. That is where we believe that bimekizumab can add tremendous value. I would encourage you to look at the entirety of the program that we have planned so far, which will give us data versus adalimumab, which will give us data versus ustekinumab, will give us data versus secukinumab. We will reach patients first with the psoriasis program because that is going fastest. Then we want to move as quickly as possible on psoriatic arthritis. Here we have chosen an anti-TNF as comparator, because if you want to specifically look at the joint disease, this is the probably most potent class of molecules. Then in the end of that phase III program, we will look at everything that we have. We will look at the competition that is existing and emerging, and then will take the right decision for phase III-B program. Keep in mind that while the scientific excitement might move quickly, physicians and payers are quite conservative. So we always have to be mindful that we compare against existing standard of care. While please rest assured we are not afraid of future standard of care. We will take the decision when the right moment comes. Then your last question was on Evenity, and you have heard in the AdCom that there is a proposal for a black box warning on the potential cardiovascular risk. I cannot comment further on this because of course, there is ongoing active dialogue with the FDA. We will collect feedback when we have the label in place, but I can tell you that the physicians dealing with osteoporosis are very well versed dealing with an elderly population, are very well versed dealing with a geriatric population with multiple comorbidities, and they know how the comorbidities have to be controlled. I can also remind you that they are very much used to dealing with medicines who have even black box warning, because that is true for the majority of the currently available treatments. So first agenda item for is to work with the regulators towards the best possible label, which means the label that is most informative for patients and their treating physicians about the benefits of Evenity and the potential cardiovascular risk. Thanks very much. Thank you. We have a next question from Trong Nguyen from Credit Suisse. Please go ahead. My questions, I have three if I can. Just following up on Richard's question on your expectations for the Evenity label. When we listened in on the AdCom, the panel was clear that Evenity was an effective treatment for post-menopausal women with osteoporosis. Is there any possibility you could get a label which is broader than those which can carry the high risk of fracture, or is your discussions with FDA exclusively for this narrower population? Secondly, just on the level of spend for Evenity. For 2018, your other operating expenses line, that included EUR 11 million for the commercialization of it. What are your expectations for how this evolves in 2019? Finally, just one on Cimzia. Can you just give us an update on the rollout of that in psoriasis in both U.S. and EU? Thanks very much. Thanks very much, and I will start with the question on the Evenity label. You have seen us going in with the label that we found most adequate. Everything else is an ongoing conversation with FDA, and I can only ask for your understanding that I cannot comment on that. Again, as I said, I am hopeful that we will have news for you in second quarter, but not today. Thanks very much for your understanding. I will hand over to Detlef to comment on the financial question, the commercial spend on Evenity that was on the books. You have to have in mind that when you are looking to that line, that it is not only Evenity that is in there. You might underestimate the real expense that is in there. When you are looking between the years, we are expecting that Evenity expenses will go up, which would be expected with the launch. In general, you could see these expenses in the higher double-digit millions for a year. To the question as to the psoriasis launch rollout, let me perhaps start with the U.S. We are having a very good launch. As you know, the psoriasis market in the U.S. is quite competitive, so we decided to go for a focused launch, what we call 4Her. Cimzia is positioned for women of childbearing age suffering from moderate to severe psoriasis. This has been very well accepted by prescribers, and in fact, we have more than 500 individual prescribers to date. We put a bridge program together recognizing that in dermatology it is necessary to, let us say, make it easy for prescribers. This bridge program is functioning very well. About two-thirds of our patients are currently paid for. I think all the fundamentals for our launch are in place now. This year is the year where we should start seeing psoriasis really becoming a key driver to Cimzia sales increases. Of course, in Europe, the launches are more staggered owing to the national reimbursement agencies. The launch in Germany is going very well, and here again, the intention to use the product, the awareness of the product is very high. The majority of patients that have been receiving Cimzia in psoriasis are women of childbearing age. I would say that last year has been a year of introducing ourselves to the dermatology community, gaining credibility, gaining the approvals, and launching Cimzia in a credible manner, and this has worked well. We will be able to scale our efforts this year and make psoriasis one of our key drivers for growing Cimzia looking forward. Thanks very much. We have a question from Peter Verdult from Citi. Please go ahead. Hi, it's Peter Verdult here from Citi. Forgive me, I've got quite a number of questions, but given that I'm towards the back end of the queue, hopefully it's not too bad. Quickly kicking off, JC on Romo. Can you just remind us what the one-year treatment cost is currently in Japan, and whether you are willing at this stage to give a global peak sales forecast? Either for JC or Detlef, just on balance sheet utilization. You've clearly expressed an appetite to bolster the neurology portfolio. You've been active in 2018. Just any high-level thoughts and perspective on what you're seeing and whether valuation expectations are becoming more realistic vis-à-vis last year. Then three, if I may, quick ones for Iris and Emmanuel. Just Iris, you talked about being courageous on trial design. You're going head-to-head against Cosentyx with bimekizumab, but at the same time, we're seeing the IL-23 class emerging as superior to IL-17, and assuming the safety profile is fine, we got the JAKs coming into view as well. Just how you're thinking about bimekizumab in the context of data that's being produced for IL-23. Then just coming back to rozanolixizumab in CIDP, would any trials in the frontline setting wait, only commence after we see the proof of concept study that you laid out in your prepared remarks? Then again, thank you for your patience. The last question, maybe for Emmanuel. Cimzia in non-radiographic axSpA. I mean, the docs are clearly infused by the opportunity in the U.S., but they point out that the market needs to be created, and it's going to be difficult to drive many younger patients through to tertiary centers. So can you lay out how much you are going to put behind trying to build the market? Are you going to wait for other parties to come in and join the party? Just how you can really commercialize that non-radiographic axSpA opportunity in the U.S. Thank you. Thank you, Peter. I can maybe quickly comment on the first two questions, and then, Andy, go over to Iris and Cimzia. It is a little bit too early to share with you some views on peak sales. You know that classically we do that when the product is on the market after a couple of months of experience of the market. So please keep your questions, and we will comment on that, including Japan, actually, a little bit later. But we are very conscious and hopeful that with the advancement of the regulatory process, we will be able to do that in the coming months or year. On the strategic flexibility, Detlef Thielgen mentioned that we are very pleased of our current situation. We have been able to reduce our level of debt. The debt decreased also in 2018. That give us a sense to be opportunistic towards potential external or inorganic growth. As you have rightly said, Peter, we are looking constantly on two key areas, I would say. One is assets that could fit and add to our portfolio. Midazolam is a nice example of what we have been able to achieve in 2018, finding an asset, which is a very good complement to what we have, proposing now to patients suffering from epilepsy, a full scope of treatment from acute repetitive seizures to chronic treatment. On the other hand, we want also to continue to strengthen our discovery engine, and we are constantly looking at technologies, platforms, and potential future new ways of developing drugs that can provide a differentiated solution for the patients. Element Genomics in 2018 was a nice illustration of that. So you can continue to think that way for us moving forward. It is more opportunistic and additions to what we have to anything else. Iris? Yeah. Thanks very much, Peter, for the question on the trial designs for the head-to-head studies with bimekizumab. A few comments in general. First of all, keep in mind that we are choosing endpoints that are very ambitious. We talked about going for PASI 90 or even PASI 100 in the control study. This means really that we expect clear skin in the majority of patients. Please also keep in mind that we are going for superiority. There's a clear ambition to demonstrate superiority, and I still believe that this is courageous. I'm with you that this is a fast-moving field, and I can read every week articles where a new molecule has been tested. And of course, we cannot switch our comparators that quickly, and we need to stick to what is current standard of care because we have to convince patients and physicians and payers, and we need to anticipate properly what is future standard of care. You shared your excitement about the IL-23 class of molecules. And like you, I've looked at the skin data and found them compelling, but I've also looked at the joint data, and I've been very reassured looking at the joint data of the IL-23s that bimekizumab is much needed by patients who suffer from psoriatic arthritis and cannot afford only having a good treatment for their skin and not having a good treatment for their joints. So look at them, and I think you will be with me that bimekizumab is a much-needed treatment alternative. And Peter, I apologize, there was a second part to your question which I could not quite capture. And Emmanuel will then talk about Cimzia and the non-radiographic axSpA population. Sure. I'll be quick, Iris. It was regarding rozanolixizumab, the FcRn agent that you're developing in CIDP. In terms of going to a frontline setting, in patients that have not experienced IVIG before, would that only happen after you have proof of concept data for what you laid out during your remarks, or would you start new trials in that frontline setting before? Yeah, we are exploring that, and thank you for explaining your definition of frontline setting. We are exploring that. We will have a very thorough look at the results of our proof of concept data at the ongoing other programs and our learnings in parallel on the patient population overall. That will then drive our pathway towards a broad CIDP population if that appears meaningful. It is really exploratory work that is ongoing, and we want to start with those patients that are really in high need to avoid IVIG therapy going forward and where we want to provide an easy-to-use medication that is very much combinable with a regular social and working life. So step by step we will evaluate as always. Thank you for the good question and the reminder. Thank you. Yes. Peter, on Cimzia then three for non-radiographic axSpA patients in the U.S. You are right that in many ways this market needs to be set up or liberated in a way. Most patients suffer from back pain, probably wait 7 to 9 years before they get diagnosed properly. Often undergo unnecessary surgery or take drugs that actually do not work for these conditions. So there is an enormous unmet need. We have established that there is at least half a million patients suffering from this condition in the U.S. So it is indeed a big opportunity. Now, if we think about stakeholders, a lot of education is needed. Let me briefly touch upon all of them. First of all, for healthcare professionals, two-thirds of rheumatologists in the U.S. are now familiar with the term non-radiographic axSpA, which is probably about double from what it was 2 years ago. The ACR guidelines, the American College of Rheumatology guidelines on axial spondyloarthritis, are clearly spelling out non-radiographic axSpA. I think from a healthcare professional point of view in rheumatology, things are now in place, which clearly wasn't the case even a year ago. There's the system and the payers. Currently, there's no ICD-10 code for non-radiographic axSpA, which could be a hurdle, and we're in the process of changing this, in collaboration with patient advocacy groups. I'm confident that this will be in place well within this year. We're also educating payers who have an understanding of what it may be and who are very interested in understanding all the healthcare resources that are misinvested in this space. There's a level of interest here that is high. Finally, the patients, and that's really to your point. How will we target patients since the difficulty is really to diagnose this, and this usually takes a doctor. What we can do in collaboration with social media platforms and patient advocacy groups is to ensure that those patients who suffer from what they perceive is lower back pain, that they start realizing as quickly as possible that there is a significant chance that this could be inflammatory as opposed to mechanical. Our efforts are really geared towards social media, those platforms and patient advocacy groups that have that outreach over the net. This way, we believe that we will be able to start growing this market and making sure that patients will access those products. Do not expect a big DTC campaign immediately. I do not think this would be the wisest way to invest. Of course, as more companies join the party, the understanding, et cetera, will continue to evolve and we actually welcome that. The two next products that may get there are IL-17A inhibitors, so different mode of action, different side effect profile. I believe there will be space for a few. We're not waiting for them to act. Thank you very much. Thanks. Thank you. We have a question from Peter Welford from Jefferies. Please go ahead. Hi. Thanks. I have two ones for Iris Löw-Friedrich, please, and then two very quick ones for Detlef Thielgen. Just for Iris Löw-Friedrich, I believe that the phase II-B PAD701 trial was enlarged during the course of last year. Is this sufficient for filing, do you think, or would it potentially be, do we have to wait for the phase III data at the end of 2021, I guess worst case or best case, depending where you look at it, before we could potentially file with regulators? On bimekizumab, could you just talk about perhaps, are there any other secondary endpoints you are also looking at within the phase III-B psoriasis, but also the psoriatic arthritis studies, that potentially could tease out differentiation features between the competitors? Perhaps just talk about what those sort of endpoints are to appeal to payers. Then just two quick ones for Detlef Thielgen. Just on the tax rate, is that 20% the core tax rate or is that, you said it was similar to this year, which I think was 20% on a GAAP basis. It was different on a core basis, I think. Also the amortization, should that be broadly similar, or I recall, I think that the Celltech and Schwarz, some of those things have died away now, and so actually amortization could be down this year. Could you give us any sort of guide as to what we should be thinking for amortization charges in 2019? Thank you. Yes, thank you very much. First of all, your question on PAD701 and whether the phase II-B as a standalone would be sufficient for regulatory submission. The answer is no. FDA will require in focal onset seizures two adequate and well-controlled studies. Our proof of concept study, while very successful, would not hold up to that standard. So we need both studies, and that is why we have kind of put them closely together so that we save time in the end. We will still need the data from both. The bimekizumab phase III studies have long lists of secondary and exploratory endpoints, because, as you rightly stated, we would not want to miss an opportunity for differentiation. I think it would be beyond the remit of this call to guide you through the entire list. But believe me, we have left no stone unturned, and we will not leave any stone unturned to find further differentiation. For me, it's further differentiation because we have talked today a lot around the basic differentiation that we see already. More to come. I can go to the tax rate. It will be on the same basis that you see this year. The comment was on the same basis. And in terms of Depreciation, amortization, it will still go up. And the main reason is Cimzia and psoriasis that we started, and not a full year in 2018. It will be a full year in 2019. And midazolam, which will be coming in 2019. And I would assume that we are seeing something around perhaps EUR 30 million of upward change. Sorry, that's EUR 30 million incremental, you're saying approximately in 2019 or 2018? Yes, exactly. Thank you. You are welcome. Our last question is from Jean-Jacques Le Fur from Bryan, Garnier. Please go ahead. Yes, good afternoon. Thank you for taking my question. Three products, if I may. The first is on Cimzia. Sales growth have slowed down at constant exchange rates in all regions in Q4. Is there any specific explanation, mainly for Europe and international, as I well understood the U.S. story on price? The second one is on Neupro. I remember that during H1 last year, you expected Neupro to reach EUR 400 million peak sales thanks to China. What has changed between H1 and today, obviously in China, to revise the peak sales? Lastly, on Keppra, in your press release, you stated that sales are continuing to mature. What does that mean in terms of sales growth or sales decline for the next two to three years? Thank you. Thank you, Jean-Jacques. On the Cimzia side, in international markets, it's mostly linked to the fact that we work with licensees in a number of markets. Therefore, the ordering pattern can vary a little bit. Those parties may want to purchase before the end of the year or after the end of the year, and that is essentially the reason why you're seeing that. In terms of Europe, I wouldn't have any specific reason. I think if you look at the intrinsic market share, Cimzia is holding up very well in a growing market. I don't have an immediate answer for you. I hadn't really noticed that the sales were perhaps slower in Europe in Q4. Certainly compared to Q4 last year, they're up by about 5% or 6%. I think it's business as usual. Thank you for your question on both Neupro and Keppra. One of the things that has changed with Neupro, and Detlef mentioned this, is that we are reinvesting in some stronger growth opportunities right now. You've seen this by the growth of Briviact and also of Vimpat. You have seen probably the market numbers showing that we see small declines in the U.S. from a TRX growth. We see Europe stabilizing. We still see strong growth of Neupro in Japan, but overall now we believe that it's a mature market, and that's why we have changed guidance. Looking at Keppra, it's a unique story, is it not? Keppra continues to do well. This is what we see. We see that it continues to decline in the U.S., and we've been saying it's going to be this mid-single-digit decline. In Europe, it's somewhat stable to slightly declining. Yet on the other side of the equation, we see strong fundamental growth rate in Japan and China, roughly 20% and 26%. Collectively, though, we still think that we'll see sort of mid-digit declines over the next two or three years. Yeah, just coming back on Neupro. My question was more directed to China, as it was expected during H1 that China may help Neupro. Yes. I well understood the switch in investment, obviously. Sorry, I failed to answer that part of your question. We have launched Neupro in China. It received approval in August. We commercialized roughly in November. It does take some time to receive reimbursement. Over the next couple of years, we're looking at our listings at a provincial level, and then hopefully we'll see some acceleration of growth. But over the next couple of years, it's somewhat slow going as we pursue our reimbursement at a provincial level. Okay, very clear. Thank you. We have no other questions. Thank you very much. Given the time, I think we can conclude the call here. Thank you all for your interest, for your multiple questions. For any further questions, you know where to find us. The UCB Investor Relations team is available for you. Have a good day for you all. Thank you. Thank you. Ladies and gentlemen, this concludes today's web conference. Thank you all for your participation. You may now disconnect.