UCB SA (EBR:UCB)

Earnings Call: H2 2011

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Mar 2, 2012

Good afternoon, good morning, and welcome to UCB 2011 annual results presentation. If I summarize the year 2011 for UCB, first of all, we delivered on targets. Second, clearly there is strong momentum with CVN tracking to our peak sales guidance at least. Third, we clearly built, in the year 2011, an exciting late-stage pipeline with real breakthrough potential in this pipeline, and this has to be put into perspective with the fact that we emptied the previous late-stage pipeline just less than three years ago with bringing Cimzia, Vimpat, and Neupro to the market. The third summary for me is clearly that thanks to a robust CapEx, but also thanks to optimizing the quality of our spending, we have been able to accelerate our investment into R&D, indeed, to fund the exciting late-stage pipeline and also some exciting potential breakthrough in the early-stage pipeline. While at the same time managing the less productive costs in a tight manner, and you have seen, indeed, flat G&A. Last point, which I am sure we will talk more in the future, is that we accelerate our momentum also in the Asia Pacific region with new product launches and also new agreements such as the one of Cimzia with Astellas, including the finding of Cimzia in Japan. You all know this statement and disclaimer by heart. I would urge you to read it. If I take a helicopter view on UCB, really, a little bit over eight years ago, when I joined UCB clearly had a big challenge with the patent expiry of Zyrtec and Keppra to come, and no new products to replace these. Since then, we acquired two company with late-stage pipeline indeed, but also with research capability to bring the company forward. We divested all the non-strategic assets, and we focused the company on two area, immunology and CNS, and from a geographical footprint on North America, on Europe, and on selected large emerging markets such as China, Russia, Korea, and others. We have integrated these three companies together. We restructured to focus not only our footprint, but our business model. Got out of the primary care, both in Europe and in the U.S., and brought our new products to the market. We absorbed, over the last three years, more than EUR 1 billion of lost EBITDA due to patent expiry. This transformation, I am pleased, is now over. We will talk more a little bit later about the year 2012. But we can now, and we are at a time, and that is an exciting time, focus on the company growth and focus on the breakthrough. I am very proud and thankful to also to our shareholders that over indeed this period, we kept on investing in R&D, and that enabled us indeed to build the late-stage pipeline, the solid late-stage pipeline that I mentioned, which is key for the continuation of our growth beyond CVN and indeed aspiring to sustainable growth. You have seen the numbers this morning. I will let Detlef comment them. He is much better than I am at doing that, in a few minutes. I am clearly happy that we achieved or over-delivered on our commitments, and I am also pleased that we reached a historical milestone for our dividend with a EUR 1 gross dividend per share. That will be what we will recommend to the shareholder meeting at the end of April. Just want to reconfirm again that CVN is driving our growth and will continue to drive our growth for many years. We have over 300,000 patients already benefiting from Cimzia, Vimpat, and Neupro, which is 50% more than last year. With this performance and this momentum, we are extremely confident to confirm the guidance once more of at least EUR 3.1 billion combined. So at least EUR 1.5 billion for Cimzia, at least EUR 1.2 billion for Vimpat, and at least EUR 400 million for Neupro. Bearing in mind clearly that for Neupro, this includes Neupro being launched in the U.S., which we expect by the end of 2012. Let me just introduce the team that will take over from here. Greg and Khoso will share the commercial side. You've been exposed to Greg and Khoso before. Greg leads our North American operation, and Khoso is our Chief Marketing Officer. Then Detlef will drill into the numbers and share with you our financial performance. Iris, of course, will then talk to you about the pipeline, and then I will conclude briefly before our Q&A session which we make as long as there are questions. With that, I'm happy to hand over to Greg in the hands of Deanne on this slide. Greg, the floor is yours. Thank you, Roch. Thank you, sir. Good afternoon. Good morning, and good evening to anybody on the phone, depending on where you're at. It's my great pleasure to kick off the commercial review, and in almost alphabetic order of CVN, we'll start with Cimzia. We had a real strong year of momentum for Cimzia as we build towards that best-in-class profile we're working on. We have 33,000 patients across the globe who've now been treated with the molecule. We're in virtually all major territories with 26 markets, and we expect to introduce the product in an additional 15-20 markets over the next year or year and a half, most notably in Japan with our new partner, as we announced, Astellas. So pretty excited about the broad geographic coverage we have for the asset, getting it in the hands of patients truly across the globe. If we dig in a little bit to the 2011 financial summary, you'll see that total sales for Cimzia were EUR 312 million for the year. That represents 63% growth on a constant basis. So really nice momentum for the product. Roughly 72% of those sales coming out of the North American region right now, which launched in both the U.S. and in Canada. Having talked a lot about Crohn's disease, so I'll spend a little bit of time there, but I think you're all probably familiar with our 12-week proposition. As you know, the science and the literature is suggesting that we should take a more acute treatment approach to rheumatoid arthritis and getting to a state of low disease activity early on in the course of a patient can confer a better outcome. We have been educating the market, both through our promotion and in general education, over the last year and a half, and that's really been a nice part of our momentum. Focusing a little bit on Crohn's disease, our basic proposition is you can get to sustained remission at stable dosing. For both Humira and Remicade, the other two competitors in the class, what you find is over time, you have dosage creep. Remicade and Humira actually increase their dose over time, which increases cost to the payers. We have a very unique proposition of getting this disease into remission quickly and keeping it at a stable dose. That's our basic value proposition for the molecule. If you take a look at our progress in North America, what you see is a very nice, steady cadence of growth. In fact, last year, for the total year, we had 43% growth in the U.S. marketplace. The sales in North America are roughly 50/50 between Crohn's disease and the rheumatoid arthritis indication. A very nice acceleration of growth in the fourth quarter, +14% for the assets. That rapid onset of action and the Crohn's disease promotion and education for our customers is really starting to pay off. It's really establishing a nice cadence of growth. What you don't see in this slide is something we're equally proud of, and that is progress on the formulary front. As you know, there are many different formularies in the United States. You have healthcare plans, you have PBMs, you have government formulary, and Medicaid or Medicare. What we did through the second half of last year with that proposition of paying for outcomes, so to speak, making a decision in 12 weeks and sticking with that decision, we've gotten a lot of payers to kind of step back and think about the disease from a long-term perspective. In fact, we've been able to improve our formulary status. Just to put it in simplistic terms, there's three basic ways to look at a formulary. You can be either preferred versus the competition, at parity with the competition, or disadvantaged with the competition. What you see over the course of time, if I can orient you to this slide, in the gray is our preferred status. When I say preferred, what I mean is that Cimzia is preferred either over Enbrel and/or Humira, the two market leaders. What you see is a very nice, steady growth in the number of lives that are covered in the preferred position from 4 million to 8 million. In fact, almost a fourfold increase to just under 30 million lives, where Cimzia is the preferred agent versus either Enbrel or Humira. Basically, that's saying if you're prescribed the product, you have to go through Cimzia before you can get to the other ones, which is a nice benefit for us. In addition, you have co-preferred or parity status, which is noted in the red. What we've seen is a very nice progress on our overall, either on-formulary, parity, or preferred status over the course of 2011. That's very good for us. In fact, if I can give you an example of what that translates into the marketplace with one of our main customers, who is very excited about this program, United Healthcare, they are actually out promoting with us the fact that Cimzia is now one of three in the rheumatoid arthritis portfolio, so one of the three preferred agents. We are now the drug of choice for Crohn's disease, which means every new patient who comes into their plan starts with Cimzia, which is a great place to be. That is the type of momentum we are generating with the sustained stable dosing and with the rapid relief campaign that is allowing us to actually open up access for the product. So we are quite excited about that, and a big part of our promotional approach this year will be pulling through that favorable access. Importantly, for those customers who are still on the fence, they have come back to us and said, "Hey, guys, let us see how you do with these plans with United Healthcare, with ESI. If that is successful, we would like to come back and talk to you because we like this idea of getting away from strict rebates and thinking about paying for performance and outcomes." That is an opportunity for us as we move forward. Simply put, our preferred life status grows 50% faster than parity or disadvantaged. So once you get into that preferred status, as you would imagine, you are the first place you stop for a new therapy that allows us to grow even faster than the national average. If I turn my attention to Europe, we had a really nice progress in Europe in 2011. Overall, the molecule grew 112%, which was very good. We are beginning our penetration into the emerging markets, select emerging markets, and we are quite excited about that. Of note here, I do not have the U.K., so we are going to introduce some new terminology here, EU4. We do not use the U.K. because of our home health delivery. You cannot audit it versus other competitors, which are prescription-based. So we have pulled the U.K. out because it is a bit of an aberration. Although our market share in the U.K., from our understanding, is actually around 13%, a very nice performance. What you can see for Cimzia in the solid red line is a steady growth in market share, and we hope to eclipse the 4% market share milestone over the course of the first quarter or the first half of 2012. Switch gears here to Vimpat. A similar chart to what you saw before. What you see here is, again, very good market penetration of Vimpat. We are in roughly 25 countries, and we expect to introduce Vimpat into a handful of markets over the course of 2012. If we step back and take a look at the performance for Vimpat, we are again very pleased with the progress we have made. Total sales of 218 million EUR, roughly the same split geographically, about 72% out of North America. The balance of that coming out of Europe, although we are beginning our penetration into the emerging markets, it is very early days there. On a constant basis, the product grew at 70% versus 2010. Our positioning here is plain and simply when monotherapy is not enough, think of Vimpat as your first add-on. I think you are probably familiar with the process by which you treat epilepsy. Most people start a product as monotherapy, then they add on to it if the patient doesn't respond. Right now, we're actually in the add-on position within our label and trying to secure the monotherapy indication as Iris will review in a minute. What's nice about our epilepsy franchise is we have much more of a heritage here. We're establishing our heritage in the immunology community, and that's a heritage we can bank on when the portfolio of pipeline products comes through. Here, we do have a heritage. We have Keppra, and we've been able to trade on that heritage to great success for us as a company and for our patients. What you can see here is a very nice, steady cadence of growth. In fact, our fourth quarter growth was 14% versus prior year. Excuse me, versus prior quarter. Q4 over Q3 was a 14% growth, and we're very excited about that growth. Highlights of this year include certainly continuing to increase our depth with our main prescribers, that being neurologists and epileptologists. Very importantly, this year, we've actually expanded into a couple other segments. First off is long-term care. The elderly are the fastest-growing percentage of the epilepsy population. It's growing fastest in the 65 and older group. So long-term care represents an opportunity for us. We've actually gone into the emergency room. As you can imagine, if you have breakthrough seizures, you don't show up at a neurologist office and wait in the waiting room. You actually go to the ER. So we've been doing a lot of education in the ER about moving Vimpat up their treatment paradigm. Rather than going to the older agents, to getting them on the right agent at the first case, starting with an IV and then moving them to the oral outside of the marketplace. Last but not least, we've actually enjoyed some substantial success in primary care offices that are serving populations that do not have access to specialty coverage. If you think of kind of that, we affectionately call them in the U.S., the square states in the middle of the country. Those tend to be underserved from a specialist community perspective, and primary care effectively serve as de facto neurologists or epileptologists. In fact, we are enjoying, in our estimates, roughly one-fifth of our new prescriptions, new dynamic patients coming from high-volume prescribing GPs who are treating epilepsy specifically. So very excited about that performance over the course of the year. If I were to put that performance in perspective, if you go back to the launch of the three most successful epilepsy products in the U.S. marketplace, you have Lamotrigine, you have Keppra, and now you have Vimpat. Just to remind you, to give this some context, Keppra, when it went off patent in the U.S. back in October of 2008, was running at an annualized clip of about $1.1 billion U.S. So we're quite excited about the momentum we have and continuing on this pace of being able to achieve that peak share guidance that we gave you earlier in the presentation. With that, I'm going to turn it over to my partner in crime here, our Chief Marketing Officer, Khoso Baluch. Kosar? Thanks, Greg. Thank you. Sure. What I will be covering here with Vimpat is Europe and the rest of the world outside of the U.S. Just when you went back to the map, pretty much in Europe, we now have Vimpat in most of the markets other than one or two small markets. The last big market for us was in April 2010. What you see up here now is steady growth, and as you begin to see the international markets kick in, that will continue to grow. What you are seeing clearly is the message that we have for Vimpat, which is, again, when monotherapy does not work, add Vimpat. In addition, what we have seen with our data is that when you add Vimpat to any of the other AEDs, we begin to see better seizure control. Similar graph that Greg shared with you, but let me just give you context of it because you see a different competitor and you also see month four. This is taking IMS data. IMS oldest data available to us is of October 1998. Lamotrigine was launched well before it, so we do not have access to that data. Topiramate is what we have got, and you can then see that was the first successful one. Keppra was the next, and now Vimpat. Clearly what we are showing, our ability with Vimpat to continue to grow. If you just look where Keppra is, and you have seen some of the data this year in Europe, about EUR 600 million. You can see where we have reached pretty much with Keppra. You can see where Vimpat is growing. Moving on to the third product, Neupro. We had several launches. In fact, eight launches during 2011. France being the last one, which launched in the early part of 2011. So we have great spread, but clearly one country of the major countries missing, and that is the U.S. Roch touched on it right at the beginning. Assuming we get FDA approval, we intend to launch in 2012. That is going to be key for us. If you look at the growth, we have had 16% growth, so a steady growth continuing as we continue to bring more countries online. The most important launch for us will be the U.S. Again, assuming the FDA does give us approval, then we will be bringing Neupro to the U.S. market. Again, focus for Parkinson very much on the many dimensions of Parkinson, and in selected markets where we have restless leg syndrome. And pretty much there are three markets where there's restless leg syndrome, U.S. being the biggest, then Germany, and then the Scandinavian countries. Those are the markets where predominantly we have RLS. Again, looking at the sales quarter-on-quarter with Neupro, you can see how the growth is going, and then the international markets beginning to kick in. Let's move now to Keppra. This is a busy slide, so let me focus on a couple of pieces here for you. Good 3% growth in spite of the fact that we've had generics already in the United States well ahead, and in Europe in September of 2010. If you look at the North American line, up there you see Keppra XR started to have generics in September of 2011. Europe had generics well ahead of that. Its impact, I'm going to share more with you. And then if you look at the rest of the world, we've had more countries launching, and specifically Japan, where we've done very well. Let me just cover a little bit more details here with you. One interesting fact is if you look at the rest of the world, we now have over EUR 100 million of sales in that marketplace, and that will just continue to grow. Second thing is, if you look at our franchise, we believe even in spite of the fact that in Europe we will see Keppra begin to have generic impact and begin a decline, we still expect the franchise, overall Keppra, for all its different pieces to be a significant franchise worth a couple of hundred million euros. Let me show this graph in a different way. If you will look at this graph, the red line here on the top represents the total sales, which is the components of all these three pieces. I'd like you to focus on the light blue line, which is Europe. We've had LOE since September of 2010, but we continue to grow. Just to give you context, there is about 450 to 500 generics approved in Europe. And so far, less than 100 of them have come to the market. We are seeing this rate of entry into our markets growing. So we expect this light blue line to erode. So keep that in mind. And that's why some of the comments made by Roch, and I know by Detlef later on, reflects the change that we're expecting. What's also very interesting for you to look at is if you were here going back in about 2005, you would be saying and looking at this red line, "I don't see this product becoming a blockbuster." But we've shown to you that Keppra is a blockbuster and we've achieved blockbuster status. So there is an old saying that, persistence does pay, which I think in this particular case does hold true. As you continue to be in chronic diseases and severe diseases and the product that we bring to the market, we see that it is not a sprint, it is a marathon, and we do get to the status and the numbers that Roch outlined in the introduction. With that, on that note, let me hand it over to Detlef. I always feel a little bit pitiful for myself. You feel a little bit like advertising in Super Bowl or doing the MTV Awards when you're presenting finances for UCB. The really exciting stuff is either before or after. You better be good. I'll try to live up to that. You have seen the numbers already today. I would say we have been able to deliver on our promises that we did a year ago. We had a nice run with Keppra, gave us an opportunity to increase the guidance, which we have done throughout the year, but also to beat the numbers that we were giving and accelerating the spend, and we talk more about that. We heard a lot about the products. The only thing that I would like to add is if you take out the three products that had some extraordinary thing, which is Keppra, and we know that there's generic erosion, and it's went very well up to now, but we have heard from Kozo the good times are somewhat over. Then you had the venlafaxine and the Tussionex, which really showed generic erosion to a significant extent. If you all exclude that, the mature product portfolio was more or less stable. That in itself is a very, very good news, which does mean that what we are seeing in terms of decrease in some of the more developed countries is somewhat compensated on the emerging markets and the Eastern European front. That is very, very nice, and it gives you an appreciation to what Kozo was relating to the Keppra franchise going forward. Looking into the numbers, I think probably a bit surprised in terms of the high sales, but with Keppra being so strong, unavoidable. Probably a bit surprised about some of the high costs, and I would say unavoidable with the pipeline that we have in really driving the value forward and taking this opportunity. We have always said we are willing to take this opportunity. We want to invest into R&D 20, 23%, this year 24. We haven't been in a need for going for other means, like project financing this year. We really have used the freedom that we had, and we feel that every cent is very well spent. As you know, we are very restrictive in terms of making investments. What you see also, and I am quite pleased about that, in the areas that we shouldn't spend the money, like for example, G&A, that we have been really frugal. This number even includes some, what I would say, one-timers, that otherwise we would have shown even a bit more of a decline. When Roch said, we are really looking into optimizing our spend, this is really getting into a second nature for this company. We know that in the future you have to provide superior value to be in the winning team. You only get to superior value if you spend your money wisely on what can create superior value. That is where we have spent a lot of time throughout the last year, really to reallocate money. Even if the numbers look a bit similar, to some extent, the composition is quite different. Keep that in mind because it is good news. Because it means we are really pushing hard on the value drivers for this company, you will see the outcome of that in the coming years. Just for the ones that might have been stumbled a bit about the depreciation numbers compared to last year, have in mind, there was a big impairment for fesoterodine, as we have that impaired, it is not amortized anymore. You see that there is a bit less of depreciation, therefore some of the EBIT and the EBITDA is a little bit screwed, compared to what you have seen last year. Now going below the lines, here we have some excitement. Taxes seems to be an area where I always good for a surprise. I have been, in the past, a CFO with 95% tax rate. Now I'm turning to the other end. I always told you, trust me. In the earlier times, it was around 30%-40% on the recurring, today I say again, 30%-40%, you can trust me, I'm right. The recurring tax is roughly 30%. What you have to have in mind, I said that before, there are extraordinary things that happen. If you're not as big, then EUR 50, EUR 60 million really have the pendulum swing. If you model, stick with your 30%, yeah, might get a bit better over time, but not now, you will have a lot of deviation. But I would not build on that because you don't know when they come. Honestly, once in a while, we don't know when they come, because some tax accrual, you only know when nobody has claimed it and the times are over that you have to have them. That is really what you have to have in mind. So don't focus too much on it, just take it like me, it is a positive when it happens. In terms of the financial expenses, this also in full transparency. Have in mind, we did the hybrid bonds this year, the interest of the hybrid bond is going through equity. Therefore, there's roughly, let's say, EUR 17 million in that range that otherwise would have ended up in that financial expense line. Just that you have that in mind so that you get a good picture where the money is flowing. But looking to the end of the day, what is coming to the bottom line, I think we have been able to manage this very well. Nice core, significantly higher than what we were promising, this is really based on the different modules that I had presented to you. In terms of the cash flows, there's not a lot to say to that really. You see that operating activities cash flows are much lower than last year. Also here, one-timers this year, strategic build-up of an inventory, mainly Cimzia. You know we are building a plant, so we have to build up inventory so that we are reaching towards the time that the plants are really active. That is money that we have to spend. On the other hand, you see on the financing activities, significant drop-down. We have paid down a lot of debt. You know that we have a different structure in our financing, a more favorable structure in our financing that is really giving us great independence and a lot of strategic flexibility. We have reduced some of this debt also. This you see here, too, and it is not so obvious because, and I am sure you have all seen that we have acquired a few shares to back our stock option program. If you feel good about your progress and you have some stock options outstanding and you will one day have to buy shares to cover these, you better do that when the share price is at a reasonable price. That is roughly EUR 140 million that we invested into that throughout the year. If that would not been the case, you would see that we would have continued to deleverage the company, and this is what we had said we would like to do going forward, notwithstanding that, as you know, we are willing for the right thing to invest. Comes to my 2012 guidance for the company that I present today. No surprise that revenues will have to drop some based on the Keppra erosion to happen. We are thinking that about EUR 3.1 billion of revenues. Not a surprise if you are dropping compared to this year, roughly EUR 100 plus million of revenues. That also your recurring EBIT has to give some, not as much than you would expect, because we all know what the cost of goods rates are, so this would be going further down. We can do some management of cost again. We have a nice range of EUR 630 million to EUR 660 million in terms of recurring EBITDA that we can put forward to you and that we are feeling we can deliver on. This is translating into the underlying core EPS of EUR 1.60 to EUR 1.70. Not too far away, to be honest, from what we had promised this year. Having in mind that we have a much stronger situation we are in terms of our strategic positioning, that we have been able to invest significantly in the progress of our pipeline, and that we are on the verge to see company growth again. You know these pictures of the pillars, what will go into that. There is another one that is coming to its end, and we are quite happy about it. It is a nice transformation that is going through the company and that it will be a sustainable transformation. Advertising is over and the fun stuff, which is our pipeline, is coming. Thank you. Thank you very much, Detlef. Yeah, good afternoon, good morning. I am delighted to convince you that every EUR spent on the pipeline is actually money very well spent because what we will deliver is sustainable growth, as Detlef said, by creating superior value to our patients and following from that to all of our stakeholders. If you look at the pipeline today, we are investing in different activities. An important part is still managing the life cycle of Cimzia, Vimpat, and Neupro. We want to make these assets as big and as meaningful as possible. Once again, we have three projects in phase III development. I do not know why they always come in packets of three, but it is the case. It is three again, which we are currently developing in phase III: Brivaracetam, Epratuzumab, Sclerostin Antibody. Again, they are following the principle of combining very attractive science mechanisms that target diseases that are full of medical needs still, now and in the future. I have not even mentioned the assets that we have in phase II and in phase I development. Again, we are geared up to create sustainable value now and in the future. Let me take you through the details. This is our CNS pipeline. I am deeply convinced that 2012 will be the year that we will see Neupro going global. We are expecting to return to the U.S. market with, of course, the approval of the FDA still pending, and we will be able to reach out to patients suffering from Parkinson's disease and restless leg syndrome. We are also making progress in Japan. As you know, through our partner, Otsuka, we have filed the JNDA in Japan again, to also reach out to patients suffering from Parkinson's disease and restless leg syndrome in this country. We are focusing on life cycle activities for Vimpat, and these are four areas. The next big topic for us are the monotherapy programs in the United States and in Europe. As you know, for regulatory purposes, we have to follow different paths there, and the U.S. program will deliver first results in 2013, and Europe about a year later. Very important and very dear to my heart is that we are developing Vimpat in pediatric populations, and that is a rolling development. We are looking into age cohorts, and once we have finished phase II in one cohort, for example, in the 16 to 4-year-old patients, then we roll on to phase III. We are delighted to also now start a phase III development program in primary generalized tonic-clonic seizures with Vimpat. Would also like to highlight that brivaracetam continues to progress in partial onset seizure through phase III development. We have another exciting mechanism, a pre and post-synaptic inhibitor for the treatment of epilepsy in phase I development. Let me give you a few more details on Vimpat. Again, the exciting event in the end of last year was the phase II results in primary generalized tonic-clonic seizures. We are very diligent and very careful and therefore have looked into the safety profile of Vimpat in this completely new epilepsy population for us. We were very happy to see, after careful evaluation of the benefit risk profile, that yes, we should go ahead and take a go decision for the phase III development. We are now working, as you always know, through the final analyses, then we will contact regulatory authorities to be clearly aligned on the path forward. Then we expect to start the program in about one year from now. I would also like to remind you that epilepsy, as we are doing it now for Vimpat, is kind of following the traditional path of development. You always start, as you see in this graph, as add-on therapy in partial onset seizures, then you evolve into monotherapy in this indication. That is then also paving the way for primary generalized tonic-clonic seizures, where traditionally you start with an add-on therapy program. So Vimpat has followed this path, and we are now on our way to reach roughly 75% of patients suffering from epilepsy, provided all of our programs are completed successfully. I would also like to remind you that there is still huge unmet medical need in epilepsy. Round about one-third of patients cannot be satisfactorily treated with monotherapy or with combinations of the available anti-epileptic drugs. So there is huge unmet medical need in this area, and brivaracetam and our pre- and post-synaptic inhibitor will be required to improve the lives of patients suffering from epilepsy. Let us move to the immunology side of the pipeline. Of course, Cimzia is still a key molecule there. We have just submitted the JNDA for Cimzia in rheumatoid arthritis to the Japanese authorities and are going through the review process as we speak. You are aware that beyond rheumatoid arthritis, we are developing Cimzia in other inflammatory arthritis, psoriatic arthritis, and ankylosing spondylitis. We have released to you just a few weeks ago, the top-line result for Cimzia in psoriatic arthritis, which was very positive. We will return to you in a few weeks from now with the results from the phase III program in ankylosing spondylitis. With Cimzia, we are also progressing with our juvenile program, and we will start the phase III program in the U.S. still in this month. Let me briefly highlight to you, and we will give you more details, that epratuzumab is progressing through phase III development in systemic lupus erythematosus, and that we are close to the finalization of our regulatory interactions around the design of the phase III program for sclerostin antibody, and that phase III will hopefully start soon. Again, also on the immunology side, we are progressing olokizumab, our anti-IL-6 antibody, in a phase II study in rheumatoid arthritis and will release data to you in the third quarter of this year. We have another exciting molecule, a CD40 ligand antibody, which is kind of a completely new mechanism of action between T-cell and B-cell activation. This molecule is another effort for the development in systemic lupus erythematosus. You might have read that we are also exploring the potential of this molecule in a neurodegenerative disease, ALS, amyotrophic lateral sclerosis. It shows you that there is also potential for our immunology targets in some of the neuroinflammatory conditions. A few more details I would like to share with you on Cimzia. We have launched two landmark clinical studies, ACCELERATE and C-EARLY. Both are intended to provide very practically related insights to the practicing rheumatologist. With ACCELERATE, we are going head-to-head with adalimumab, and we are investigating the long-term outcome when we very early onwards in the treatment, treat aggressively towards remission and take quick decisions in optimizing the treatment regimen. That's the purpose of the study, showing that optimized treatment regimens, aggressive treatment towards remission, will halt joint damage early and thereby prevent the ongoing inflammation, thereby prevent disability and long-term damage. We're doing something similar with the C-EARLY study in a patient population that has just been diagnosed with rheumatoid arthritis, so where there is huge need and huge potential to prevent permanent damage. Also here, in a way that's very relevant for the practicing rheumatologist, we are exploring what's the optimal treatment regimen for these patients going forward. I could not resist sharing with you the top-line result of Cimzia in psoriatic arthritis. We are saving these data for scientific congresses, but just to give you a flavor of what to expect. We have tested two doses of Cimzia, 200 milligrams every other week, 400 milligrams once a month versus placebo, and we have looked into the ACR20, ACR50, and ACR70 responder rates. What you see here, marked by the asterisks, is that every dosing regimen for every parameter was statistically significantly different from placebo, and I can add this in a clinically very meaningful way. Again, more to come at future congresses. I wanted to talk a little bit in detail with you today about epratuzumab. As I mentioned before, we have launched the EMBODY program, two phase III studies. Which are intended to show that epratuzumab is an efficacious agent for the treatment of systemic lupus erythematosus. There are two very distinct pieces of scientific evidence which convince us that epratuzumab has high potential to be an efficacious treatment for SLE. It starts with the mechanism of action. Epratuzumab is a humanized IgG antibody, and it targets CD22. CD22 is a surface antigen of B cells. B cells, as you all know, are an important part of our immune system, responsible for what's called humoral immunity. Which means that after a long maturation process, B cells turn into what we call plasma cells and secrete antibodies against a single antigen. In a healthy condition, this is a good thing because in a healthy condition, the antigens belong to viruses and bacteria, and the defense that's provided by the plasma cells is important to keep us healthy. In an autoimmune disease like SLE, these plasma cells turn against antigens of the body because there is a lack of recognition between self and non-self. So they become part of the source of the disease. So what do you do in such a state? On one side, you want to maintain the healthy defense against external antigens, viruses, bacteria, and on the other side, you want to suppress the pathological activity. We are convinced that by blocking CD22, we can do this. We affect the maturation process of B cells without depleting the early stages of the B cells, and we have thereby a suppressive effect on plasma cells. This is the scientific basis. As you know, the scientific basis has already resulted in convincing phase II results in the EMBLEM study. You have seen this before. This is just a reminder. We have looked into responder rates with two therapeutic regimens, different therapeutic regimens of epratuzumab, and two of them looked particularly promising versus placebo. We have responder rates with placebo in the order of magnitude of 20%, 21%, and we have responder rates with the two best treatment regimens, that is 2,400 milligrams cumulatively over 12 weeks, of 40% to 45%. So we are twice as high in terms of responder rates on active as compared to placebo. That is pretty unique in a difficult-to-diagnose and treat disease like SLE. That is what we try to repeat in the phase III EMBODY program. Two virtually identical studies intended for treatment duration of 48 weeks, and we are exploring placebo versus 600 milligrams every week for four weeks, versus 1,200 milligrams every other week. These treatment cycles are repeated over the quarters. The program is ongoing, and we expect to be able to deliver results to you in 2014. A few words on sclerostin antibody. Our very innovative principle to treat bone loss disorders. You all have heard about the mechanism of sclerostin antibody before. The option, the hope, and based on everything that we have seen so far, hopefully soon the reality, that we can form new bone in bone loss disorders. You have also heard about the most encouraging phase II results that we have provided in April last year, where we have seen statistically significant and clinically meaningful superiority over placebo, but also very promising results in comparison to two standards of care, a bisphosphonate and teriparatide. As I said before, we have gone through the regulatory interaction process that you always do between phase II and phase III, and we are getting closer to the start of phase III. I promise that we will update you with more details about the phase III program when the time comes and when the studies have started. With that, I would like to close my tour of the pipeline today. Again, I hope you see important assets, very attractive mechanisms in disease areas of high need now and in the future. I am very confident that once again, the pipeline has the potential to be transformational for UCB. With that, I hand back to Roch. Thank you, Iris. You all know now everything about UCB in 2011. You know everything about our late-stage pipeline and how it is going to drive our company growth in a sustainable fashion beyond Cimzia, Vimpat, and Neupro. Sorry. The 2012 year is an exciting year for UCB because it is the famous crossover year that we have been talking for quite some while. It is the year where the Cimzia, Vimpat, and Neupro growth offset the remainder of our patent expiry, mostly Keppra in Europe. By the end of the year, indeed, we expect company growth to start for UCB. You all know about UCB's roadmap, which we implemented consistently and with persistence, as Kozo mentioned, over the last few years. After the integration, the acquisitions first, the integrations next. The first pillar was all about managing, indeed, these patent expiries and building enough momentum in CVN. I am pleased that we can now focus all our energy on the company growth and on the breakthrough with the same driver to deliver on our commitment. Our goals there, our dream, is that UCB becomes the patient-centric biopharmaceutical leader, and we are sure over the years to come, we will bring some more precision behind what that leadership can be. With that, I am pleased to take question. I will ask my colleagues to grab a chair and come on stage, and I will have Ansha being the master of ceremony. Hello? Yeah. Right. Okay. It is Richard Parkes from Deutsche Bank. I have got three questions, if that is okay, and I will probably take them in turn. First one for Greg, I think. Just in terms of Vimpat. What percentage of use of Vimpat now in the U.S. is as first add-on? Can you tell me what the average copay differential between Vimpat and the generic is in that setting? Great question, Richard. We are up to a 2.3% share if you look at the overall epilepsy marketplace in NRXs and TRXs. In the add-on segment, 24% of the time, Vimpat is chosen first. So roughly one out of four times, Vimpat is the one that is chosen first. We have another 37%, 38% where it is the second add-on. So we are obviously desperately trying to get all of our second, third, and fourth line add-on into that first spot position. As time goes on, we are seeing people are quite comfortable with it. The drug plays quite well with other drugs. There is no known drug interaction, so that message is actually playing quite well. We went out with a very heavy efficacy story to start with because if you look at the history of successful pharmaceuticals, they start with efficacy, and physicians are coming back to us and saying, "We never thought we would see something that worked as well as Keppra. By the way, what I love about it is I can add it to just about anything." So if you come through the door on X, Y, or Z drug, we can add it. So we are quite pleased about that. The copay question is a good one. It depends on the plan, is the short answer, but I would say on average, Richard, we probably have about a third, maybe 25% of our business in tier 2, and the remainder would be in tier 3. We have access in about somewhere between 85% and 90% of the population has access to our drug, either as tier 2 or tier 3. The copay difference between tier 1, which is around 15 bucks these days in the U.S. Tier 2 is about 35, so it is about a $20 difference between tier 1 and tier 2, and tier 3 is about $55 on average. So there is about a, call it a $40 difference. What we do for patients that are non-government, because we cannot assist government patients, is we actually have a copay card. The copay card allows patients to enjoy taking a tier 3 copay and making it no worse than tier 2 copay. We do distribute those for patients in need, which we feel obliged to do because we want to make sure this drug gets into the hand of patients that need it. Great. Thank you. Sure. Then one for Detlef. Just wondered if you could talk about what proportion of your receivables are from Southern Europe and what your current experience is with cash collection. Yeah. As we all know, Southern Europe always has been slow in paying, especially in the hospital space. It has not gotten better, as we all know. It is not substantial for us. We have also different ways of deal with that. We are playing with insurances, with factoring, so we are reducing the pot further. What we are seeing is, as everybody else was discussing that, is there anything that you should do in terms of moving more towards cash against product? We don't feel really good about that. Because first of all, our experience is not that we are seeing write-offs that would give us reason to do so. Secondly, it's vastly against our patient-centric nature because we have products that really are needed in hospitals. Think about Vimpat and IV, think about Keppra and other products that are really in that space. To go there and say, "We are not delivering because you might not pay one day," which we have not experienced. Let's say that. We have not experienced to a degree that it really is bothersome, would not be the right thing to do. So it's not a big issue for us at this moment in time. The overall is probably in the two-digit millions, but we have not seen a vast write-off potential. Then final question for Iris. I'm just wondering if you could help me understand the design of the head-to-head study of Cimzia and Humira. Because I think the way I understand it, patients are crossover between the arms of the study maybe after 12 weeks or so. It seems that strategy is likely to reduce The power of you being able to see differences between the two drugs. So I'm just trying to understand why not just do a 12-week head-to-head study and show you get a faster response. Yeah, I think it's our firm belief that it's not about the 12 weeks and the fast onset per se. Why do you need aggressive treatment, and why do you need a fast onset of action? You need it because you do not want to allow inflammation to persist. Because inflammation means joint damage, and joint damage means ultimately disability for the patient. That's the reason why you need an early best treatment option for the patient and why you need this aggressive management towards remission. And of course, you need then the connection towards the longer-term outcome. And again, as I was trying to say, this is a study intended really guiding the practicing rheumatologists towards new best practices, very much in line with what the scientific communities recommend these days. And that's why there is this long-term phase to it. How do we do this on the statistical side? As you have seen, there's a sample size of round about 900 patients, and there's a sophisticated statistical design adjusting for the multiple switches between treatment arms. Questions after Nicolas. If you'd like to ask a question, please press 7 on your telephone keypad. I've got three questions, if I can do. Firstly, I guess I'll start off with the pipeline question, because that's where we ended. Just with regards to anti-sclerostin, given phase III is obviously starting soon, can you give us some detail on the long-term toxicology for the data you've got so far in-house and what, I guess, is still to come, and also what's the longest of the duration patients have been treated at the central number of patients that were treated with antibody? In terms of toxicology studies, as you know, with all antibodies, there's a reduced toxicology package. Based on the data we have so far in-house, there is no concern on anything in terms of toxicology. I know one of the concerns is always do you see carcinogenicity, and based on the data we have so far, there's no concern there. Another concern is do you see ectopic bone formation? Do you see bones where you don't want to see them? No, we don't see this. Our long-term toxicology data, to the extent they are available today, are completely clean, which is very nice and comforting. In terms of patient exposure, the longest duration clinical study that we have is the phase II study, and the data that were reported in April last year were 12 months data. The study, of course, continues. At this stage, we have exposure for around about 18 months, 24 months. The next two are first together because they're related, I guess, to Detlef on the financial. I guess firstly on the margin, you're out of the currently EBITDA margin. Basically, it suggests essentially flat year-on-year. You've given us insight that clearly the gross margin will be under pressure given the expiry of Keppra in Europe. You've given us some insights into G&A. I guess, that suggests that for the R&D and sales and marketing, they're going to be able to come down during the course of the year. Yet, the message certainly from Iris is very much, I'm going to spend more money and equally for you. I guess, can you give us some flavor as to how R&D and sales marketing can be controlled? And then the sort of third one, which is related, there is a comment on the Newswire that European Keppra is going to halve in 2012. Is that officially the way you see it? I think before you thought it more as a third type outlook. Do you have data on why now it could potentially be a 50% decline, and what is the rationale behind that? Starting with the last one, it is very consistent to what I said before, within the first 12 to 18 months after the generic erosion really starts to hit, which has been delayed. We still assume that 50% of this sales will deteriorate. So this is very consistent. I do not really know where the third is coming from. I would assume that somebody probably used that because of the delays. But we never used that. So we are very consistent on the 50% over that 12 to 18-month period when the generic erosion hits. In terms of the gross margin, first of all, yeah, as I said before, you would have to expect more, and you will have to put some measures in terms of expenses. I think I hinted on that I believe we will have to spend strongly on R&D, which leaves not a lot of spaces where to take it. I hinted on that due to the optimization program, in being able to reallocate money to the right purpose, we feel that we are more efficient, which then has to add mainly in SG&A, and that is what I would expect. Okay. So it is Nicolas Gueguen, and then followed by Brian Bourdot, and followed by Peter Verdult. Yes. Good afternoon, Nicolas Gueguen, Exane BNP Paribas. Two questions from me, please. The first one is on the competitive landscape for Cimzia. Could you please discuss the potential scenarios depending on the label of Pfizer JAK3 and their impact on the overall market, if it is approved as a second or a third line? Do you see any risk from today's results of Actemra versus Humira? That is the first question. Thanks. Okay. Let me start off with answering that question. Your question related to JAKs. We have looked at it quite a bit. We have modeled both JAKs and biosimilars in the modeling that we have done when we gave our peak sales assumptions for Cimzia, the EUR 1.5 billion. Clearly, a lot has still to be seen about the JAK, in terms of the total package that it provides in the marketplace, and when it is out in the marketplace, how will it be adopted by the physicians. Clearly, when you look at new mechanisms that come to the marketplace, the behavior both in Europe and the United States varies in terms of the eagerness to adopt new technologies, particularly when safety and side effects profile may be questionable. Once the data comes out, I think we will have a much better appreciation. But once again, we have modeled that into our base assumptions. Alice can comment on the second part or the first part, whatever you want. Yeah, your question was about the Actemra data that were released today with superiority over Humira. Very clear, we have always known that adalimumab can be beaten. That's why we have a head-to-head study, and that's a very simple answer to the question. We also think, if I can add this, that also Actemra can be beaten, and that's why we have a tocilizumab arm in our phase II study with olokizumab included. So, there might be better molecules within the same mechanism of action within the same class, and we are determined to prove that. Okay, and my last question is around epratuzumab. Could you please update us on the recruitment, how it is going, and how you plan to deal with the issues Benlysta faced with regards to the different population, be it from American patients or Caucasians? Am I right by thinking that it's going to be positioned for more severe patients with potentially a smaller eligible population? Thank you. First of all, recruitment is tracking according to plan. As you have seen, we have not changed anything with regard to when we expect final data from the study, so recruitment meets our expectations. With regard to the African American population, we have taken the feedback that Benlysta received into account, so that's reflected in our study design, and we have appropriate stratifications in place. I apologize, can you repeat the third part of your question? It was just if you aim to position it in more severe patients with potentially a smaller eligible population. If you remember correctly, the phase II study was designed to explore the efficacy and safety in moderate to severely diseased patients based on the relatively simple insight that if you have an active population, and if you combine this with a sensitive instrument to measure activity, and if you combine this with an active drug, you will most likely see positive results. That worked well for us in the phase II study, and the intention is to repeat this in the phase III study. Thank you. Brian? Good afternoon, Brian Bourdot from Barclays. Thank you very much for your presentations. A few questions, please. I am sorry, Detlef. I think they might all be for you, so perhaps they are not so uninteresting after all. At least not to me. Firstly, I noted your comment about the mature product portfolio being flat in terms of sales this year. If I could ask you specifically about the other line, it looks to be about a bit more than 20% of your sales. It was down about 6% this year. Clearly, there is a mixture of things in there, some brands, some generics. And it has been declining for the last few years, so divestments, generics, and so forth. How should we think about that line going forward? Should we think about it as continuing to expect a continued decline? Should we think about it as possibly being stable? Or should we think about it as even perhaps with some opportunity to grow, for example, through the launch of your own new generics, for example? I am sorry, that is a very long-winded first question. I do have a couple more. It's a reasonably short answer. In general, if we were to take out the generic space, because that is difficult to predict. If we take that out, I think I mentioned in the past, mid-single digits for the mature product portfolio would not be unreasonable. Please have in mind that depending on our current development, that might be a bit more or a bit less. That is the first part of the answer. Yes, part of that mature other is the generic portfolio, which has shown ups and downs also. But you mentioned a few new products that potentially could come, and therefore it's very difficult to predict. As we know, with these products of certain size, if there's two competitors or three competitors, or it's eight or nine competitors, it is very much different. For the time being, I would say go with a slight decrease, because we have put a portfolio approach on these generic opportunities, which will say this is what we very likely will be able to achieve when the one or the other product is doing a bit better or a bit less, and we still have to get approval for these two. Thanks very much. The rest of my questions are much shorter, you'll be pleased to know. Firstly, working capital was a drag of EUR 110 million on your cash flow this year. You talked about some inventories being built up. Do you think there'll be some alleviation this year, or do you think they'll continue to be a drag? Similarly, also there was an increase in provisions of a couple of hundred million on your balance sheet this year. Could you give us some color, Yep what's driving that and whether that will continue? Yeah. It is reasonably easy to say. Yeah, I think that inventory will still go up because of the strategic build-up of especially Cimzia, and this will be probably in the 2014-2015 space that this will start to move downwards. In terms of the provisions, mainly tax-oriented provisions. We have released provisions, but also build new provisions, and that is substantial numbers both way. Great. Thank you. Sorry, if you can indulge me, just one more, please. Then I will be quiet. I noted your comment about buying back stock against your executive options program. Is that done now, or should we expect that there will be further significant share repurchases this year? The reason I ask is that because that together with the dividends is quite a significant portion or even more of your free cash flow in 2011. Yeah. No, we have used the opportunity on buying some stock when bigger blocks were available, which is interesting. We are shifting some of that into options again, which then is cash positive, as you can imagine. We are selling the shares, getting options against that. So we are optimizing the portfolio. I am not ruling out that in overall coverage of our programs, we still will be increasing. I would not think that substantially cash outs will come. Might be for temporary reasons, but not expected to be much. Great. Thank you very much, indeed. You are very welcome. Thank you, Bernd. Peter. Thanks. It is Peter Verdult here, Morgan Stanley. Few questions. Just firstly to Greg. When you speak to the rheumatologists, the usual feedback we get is they do not see much differentiation between the different anti-TNFs. I just want to know, I know you lost some contracts last year. You talked about the UnitedHealth contract that you are now a preferred partner on. I just want to get a better understanding about the rebating environment and contracting environment. How aggressive do you have to be on price to win that UnitedHealth contract? Secondly, for Iris, on olokizumab. Can you just remind us how you are hoping to differentiate this product versus Actemra? Lastly, similar to the question previously, Detlef, on Kudco. Could you remind us what the dynamics are of that business at the moment in terms of revenues? I think everyone is aware of generic Lipitor and the portfolio approach you talk about, but I am particularly interested in anything you are willing to say on generic Concerta. Shall I start, Peter? For obvious confidentiality reasons, I won't go into the specifics of our rebate. But what I can tell you is the rebates are predicated on a philosophy, two philosophies. One, start thinking about paying for outcomes and getting away from just the classic deep discount. You can model what that would look like over a reasonable population. But what we're suggesting is, given our response rates, let's pay for positive outcomes. The second premise is to get people out of the quarterly rebate mindset and to take them over a couple of years. What that does for our customers is it allows somebody like UnitedHealthcare to go to their customers, who are increasingly asking them not, "What are you doing about my primary care business?" Because I think they feel like the primary care business and a lot of the small molecule business is quite well managed. "What are you doing about the specialty part of my benefit?" It allows them to go and say, "We're doing something very progressive about it." So we've actually found that some of our customers are taking our program and going downstream to their customers to sell it as kind of a new offering for either the plan or the PBMs. Because I think it'd be safe to say, the PBMs recognize this kind of short-sighted rebate world is not going to persist forever. We got to get to aligned incentives, and that's what the contract is predicated on. Comment on the differentiation olokizumab versus tocilizumab. It starts already with the mechanism of action. Both of them are anti-IL-6 antibodies. Olokizumab targets the cytokine itself, so it binds IL-6. Tocilizumab targets the receptor, so it binds the IL-6 receptor, which is already a big difference within the same mechanism of action. There are hints that these different mechanisms of action within the IL-6 class might lead to difference in efficacy and might also lead to different safety profile. All of this, of course, to be elucidated in the context of the ongoing phase II study, which enrolls about 200 patients. Of course, we are testing placebo, different dosing regimens of olokizumab. As I said before, we have one tocilizumab arm for descriptive purposes for exactly this comparison included in the study. We will be in a much better position in third quarter to give you based on data, our latest thinking on potential differentiation. Cremovorban is roughly a $300 million U.S. dollar business. Nice profitability. As you know, generic business always sees some decrease over time, just through the normal pricing erosion that you see over time. What is going against it is that we have invested in the last few years in building a product portfolio with new launches. We heard about the Lipitor, the Concerta as two big products this year coming to market. We do not have the regulatory approvals now. Which is not unusual, because we are still running in the timeframe. We will have to see what competitive environment is there. That is the reason for the approach we are taking, and I think it is an approach that has fared us very well in the past in a very volatile marketplace. Richard, then Kayu. Hi. Thanks. Richard Vosser from JP Morgan. Going back to the Cimzia development, and I think in the third quarter, we saw a dip, and now in the fourth quarter, an acceleration in volumes. Again, this year, we are seeing an acceleration again in volumes. Could you just talk about the reasons for why we had that dip in Q3 and your confidence level in the acceleration going forward in the Cimzia prescriptions? From commercially, how you see Actemra, the results today impacting in the short to medium term, the anti-TNF space? Then two pipeline questions just on sclerostin. A little bit more detail on when we might see the fracture healing data, how we could think about that relative to the osteoporosis data, and whether that might lead to a faster path to market or not. Finally, just Neupro. You are confident that it is going to be on the market by the end of the year. Just if you can give any color on when you might be filing that back with the FDA. That would be great. Richard, maybe I will start with the first. As I mentioned, we have enjoyed some success from a formulary perspective in our preferred position, which has moved up our overall combination of preferred and co-preferred. We did lose some formularies. In fact, we had one plan where we went back with the proposition, and were removed from formulary. What they did as a consequence of that, they sent letters out to the community saying, "Here is what our formulary is going to look like in January." It confuses the market, and we acted quite swiftly on that. But we did have to deal with that consequence. What gives me confidence, more importantly, about the future is I gave you one example of a plan. There are others, as you would imagine, that have joined on. But what honestly gives me most confidence is the education, which gets to the mindset that the European rheumatologists have about treat to target being a more impressive way to go, is starting to take foothold in the U.S. And our proposition of make a decision early to suggest arrest, get to low disease activity early for the profound enduring response, is starting to take root. What we have seen, if you are watching the weekly prescriptions in the U.S., is now the new prescriptions are actually growing faster than total prescriptions again, which we are quite pleased about. I think it is about 2.5 times the rate in the RA space, and actually 3 or 4 times the rate, depending on the week you choose, mind you. They bounce around a little bit on the CD space. It is really candidly more of the proposition that has given us that momentum through the fourth quarter and righting that unfortunate situation in the middle of last year. Your question about Actemra and the study results, maybe I can answer that. Costa, feel free to jump on if there is anything to add. I think somewhere on the order of 85% of physicians, when surveyed, will say they will use at least two anti-TNFs before they move to another mechanism of action, suggest that our success will be predicated on becoming one of those two choices. I do not think, even with the results we saw today, that you will see a major dent such that people will go to one TNF before they go to the alternative mechanism of action. What is critical for us is to make sure that when they are choosing either the bio-naive patient or the first switch, that we are in that mind space, because that space, I think, will prove to be enduring. That is what our research would tell us, at least to this point. I will take a question on the fracture healing data with anti-sclerostin antibody, and thank you for the opportunity to talk about the studies. We have two phase II studies underway, one in tibia fractures and one in hip fractures, aiming at accelerated healing with anti-sclerostin antibody. We will get the results in the course of the year. We will first of all have to see the results. This is the first time ever that anti-sclerostin antibody has been explored in this indication. We will then have to engage in the usual regulatory interactions. Again, this is unprecedented, and we will have to see how the dialogue with the authorities goes. Because of all of these unknowns, I would caution you to expect that this might be a faster-to-market road. I think the fair point at this stage is we just do not know. It will depend on the effect size that we are seeing, which will drive the patient population and the sample size for a phase III program. It will depend on how authorities look at the systemic application of an antibody to achieve these results. Some unknowns, and we will move as quickly as we can, as always. Your question about Neupro, I can only reiterate my personal confidence that we will be reaching out to patients in the U.S. suffering from Parkinson's disease and restless leg syndrome. That requires approval by the FDA, and that is about as much as I can disclose to you today. I can only ask for your understanding. Okay, Kayu, and then Mark. Douglas, one for you, and then Iris, two for you. Just starting with the revenue guidance for next year and just thinking this through, if you look at EUR 3.1 billion relative to where you are this year, implies down EUR 100 million. The Keppra guidance implies down EUR 300 million from a European perspective. Everything else remaining constant, should we assume that most of the rest of the EUR 200 million you are assuming in growth next year comes from Cimzia, Vimpat, Neupro? There will be a potential path coming from CBN. You will see some of that you are ticking off. There will be some other parts going up a bit, and you will have some emerging market that is improving. That is a mix that you have to think in. But yeah, we are very confident about CBN, that this will deliver. No doubt about that. You are not assuming a meaningful contribution either from atorvastatin or from Concerta, I guess, is the rest of the question. As I said, we go for portfolio approach, which is probably a middle of the road approach. Having not the ANDAs approved, don't know about the number of competitors in the field. As we know, between having a few competitors in the field for these type of products and let's say 6 to 8 competitors in the field, there's huge differences, and it would be very unwise to think about positive outcomes as a standard in a budget process. Iris, when should we expect to see the phase II data for this cross-reacting antibody in PMO? It's been a year, coming close to 11 months since you announced the top-line results, but we've seen no publication. Can you share with us, should we expect it at ASBMR? Should we expect at EULAR? When should we expect that data? That should be the expectation that the data will be released in more detail to the scientific community at ASBMR this year in October. Then secondly, having spent 11 months talking with the agency about the phase III trial design, can you help us understand how this might be different from a traditional osteoporosis trial, what endpoints might allow you to actually have a meaningfully different label to the existing labels? I can reassure you that a lot more has happened in the past 11 months than just talking to regulatory authorities. It takes a lot of effort to prepare for osteoporosis phase III programs. As you know, these are pretty large programs involving thousands of patients. There is a lot of other activities that are taking place. As I had promised to you earlier, we will reach out to you with details of the phase III program once it has started. I think you all have a very good understanding of the regulatory framework that is available because there are precedents of osteoporosis development programs. There are some nuances to that driven by the innovative mechanism of action. Again, we will talk about this when the time comes. Lastly, and I hate to go back to this, but Neupro in the U.S. What is stopping you from giving us additional clarity today on when you plan to file? Is it uncertainty? Is it lack of agreement with the FDA on what it is that they need? Because just simple math will tell you, if you expect to be back in the U.S. by 2024, you need to file by June. It is consistency in our communication to you, nothing else. We have always said, this is a unique situation with Neupro, and we reassure you of our confidence that we will not give details of the regulatory process. I can only ask for your understanding to respect this as we are in the final year. Thank you. Mark, and then Christian. Followed by Sachin. On Cimzia, you do these head-to-heads to show you have a faster onset of action, you should be used earlier in the treatment paradigm. Could you maybe tell me where you are with biomarkers in this situation, and whether you think there's a route there to use your product or differentiate it? And a similar question for ocrelizumab and where that fits into the kind of treatment paradigm, and whether you think safety is a more important factor here or the efficacy, or whether you could have two doses into a phase III. Yeah. If I start with Cimzia, the ACCELERATE trial, I have referred to it as a landmark study, and as such, you can rest assured that we have included biomarkers, genetic markers, a lot of patient-reported outcomes. If you go through the details of the study, there's a lot of secondary variables that will be very thoroughly explored over the time. Again, it's a unique opportunity to provide information to the treating rheumatologist, and we don't want to miss on this. With regard to ocrelizumab, I can only reiterate what I said earlier. It's too early to say where it will find its place in the treatment armamentarium. We will know this much better once we have looked at the phase II data, which, as I said before, the study includes a tocilizumab arm. Study is not powered to show superiority over tocilizumab, but we will have a descriptive comparison. Again, also in the phase II arena, we're of course including variables that seem important for us and that seem to hint at further differentiation. So there's also a whole host of secondary variables included in this study. So we have Christian and then Sachin, and after Sachin, we take from the- Christian Glennie from Edison Investment Research. Couple of questions, if I can, on epratuzumab. Firstly, on the endpoint in the trial, it seems to be more heavy focused on the BILAG score as opposed to, obviously, what Benlysta achieved, much more focused on SLEDAI and most of the other late-stage candidates. Some insight into that rationale and what your expectations are there. Yeah. First of all, the BILAG is a part of the evolving regulatory guidance around SLE. It's becoming a standard tool, if you want to say so. As you know, we have also had very solid interactions with the regulatory authorities in the design of the program. All of this is acceptable. Our rationale for choosing a composite endpoint, which has BILAG as a heavy contributor, there's also a SLEDAI component, there's also a physician assessment of disease activity component. Our rationale for this was what I tried to say before. What are we looking at? We are looking at a patient population with moderately to severely active disease. Then you need an instrument that's sensitive enough to detect changes of disease activity. Then, of course, you need an efficacious drug, and that should give you, if everything else goes right, positive study results. That has driven our choice towards BILAG because it's a sensitive instrument that captures changes in activity, in our conviction much better than SLEDAI, which is a more static instrument. Okay. Just as you were thinking about on that, would you put that down partly to, you had a much lower placebo response in the phase II trial? Is that anything to do with that aspect that we've seen in quite a much higher placebo response in other trials? Yeah. We are very happy with the placebo response. Again, we have talked about this on other occasions. Late-stage development in SLE is still a very risky endeavor. There are many precedents of technical failure. We have tried to learn from all of these precedents and to get our best learnings into the phase II. It worked very well with us within the phase II. You also remember we have central BILAG reading, which might be another important component to reduce variability. What we are trying to do now with the EMBODY program is replicate the success of the phase II study, of course, in a much longer time frame. Okay, so my final one is, given all you said about it and your confidence in the mechanism action and everything, some rationale or insight maybe into the decision to seek to sub-license the product. Then in terms of that, what stage are you at on that? What level of activity, licensing activity are you at, and is there any expectations in terms of timelines for that? I think the decision to create the freedom around the product is very consistent with our excitement about the potential that is behind it. Because, again, the dealing you are referring to is nothing but creating the freedom for us to do what we want to do with the product. Okay. Then, you are seeking partners for the program. Is there any update on, in terms of the level of interest you have had, and where you at with those discussions? We have created the freedom to supply. That is all we have done at this stage. Okay. Sachin, followed by Loveth. It is Sachin from Kempen. I will start with Neupro. Have you seen the phenomena that some desperate patients fly over from U.S., come to Europe to get Neupro? I just want to know, when you actually launch, how many people are out there desperately waiting? Or you see the reaction that, okay, we have a lot of cheaper alternatives in the meantime. It is okay. It is coming. You have to go through the same drill of ramp up, which is even slower than experienced earlier. First of all, we have a compassionate use program in place for those patients who were on Neupro and who desperately needed it to continue. I am not aware of large numbers of patients flying over to Europe to get the drug, but I am aware that there are patients who are, how should I put this, waiting for Neupro to become available. That is hard to quantify. I leave it to Greg, whether this is a predictor of how the uptake will be, but there is clearly a need that we are seeing. No, we have not quantified that particular question. I will say that there is examples, if we look at our own Vimpat, launching into a market that is basically all generic, where you can be successful. For the future of Neupro, I think what you will find is most of the patients that we talk to have been on one, if not many of those and cycled through because they are quite desperate at this point. We do think there is a pool of patients who are going to be quite excited about the product, but at this point, we have not quantified it to your request. Just adding a little bit to what the two have said. Predominantly in the markets we are operating, it's generic. There are clearly patients that benefit with Neupogen, and we are making progress on that front. If you're covering the airline industry, please, the airline industry is not going to go bust because suddenly we're bringing Neupogen to the U.S., all right? Because we don't have data that suppose that many folks are flying across to get Neupogen here, all right? Fair enough. I'll go to olokizumab. What's your hypothesis why targeting a cytokine is going to work better than targeting the receptor? There must be some hypothesis that you have. Secondly, do you think you are a little bit late there? If I understand correctly, it is coming from ex-Celltech, and the guys who left Celltech made another IL-6 targeting pegylated antibody, which in a company called Alder Pharma, got $1 billion on that. I think you're a little late there, or you were wrong in letting those guys go. I'll give you my personal perspective. I think it all depends on what the quality of the molecule is and what it can bring in terms of benefits to patients in need. I think we are all in agreement that IL-6 is a potent treatment principle in rheumatoid arthritis and a whole host of other inflammatory diseases. There is scientific evidence that targeting the cytokine may be combined with additional efficacy, may also be combined with a different safety profile. Way too early to say at this stage, all of this is very speculative, but that's why we are going through development programs, and that's why we are very diligent in the design of our phase II study to include comparative information, and that will drive our future decision-making on the molecule. Okay, then lastly, what steps are you taking to improve the visibility of the company in the space of immunology? Now, if you speak to anyone, epilepsy, UCB is the name. If you speak in Iris, what are the steps which were taken last year to announce it? That is it. It is a good question, and even just starting with epilepsy, it has taken us time before we began to be recognized in the space as the leader. Clearly, what you do look and what Iris discover, looking at our immunology line, looking at the follow-up products that we do have, we are clearly showing that we want to be in the space. To that effect, we are beginning to look from our communication perspective, our connectivity externally. We are beginning to explore a lot of different channels that we have not done in the past. I recall as we were out there talking a little bit about congress booths as an example. Clearly, we believe the way that, as an example, has operated in the past may not be the way we need to operate going in the future. Clearly, what we want to do is make sure we connect and we share some of the signs that we have in the organization in a more effective manner. I think you are going to see us as we go into the future, steps that we are taking to position ourselves, that we are here for the long run. We have one question from the line. The next question comes from Jean-Michel Pell from KBC Securities. Please go ahead. Yes. Hello, everybody. Thanks for taking my question. I have two questions. The first question is on Cimzia and the message of rapid onset of action. I want to bring that towards the other new oral compounds, the JAKs. We all know that these JAK compounds have a very fast onset of reaction already. DAS28 drops at 4 weeks, which is substantially faster than biologicals. The fact that you want to position Cimzia maybe as one of the fastest products in the biological space, isn't that making you extra vulnerable when Pfizer would come on the market and try to play the fast onset? I would just like to know your comment on this. Second, also on the olokizumab. This really is a question towards the two marketing leaders present there. I would like to know, when you speak to the rheumatologists, what are their main concerns? Where would they like to see improvements when they are using Actemra? Is that different in Europe versus the U.S.? So dosing regime, or would it be more the safety profile, or is it more in the efficacy? I would like to know your comment there, what the market really is looking for in an IL-6 mode of action. Thank you. I apologize for the very bad quality of this line. If we don't get your answer correctly and the answer is not sufficient, please follow up with me on email. I'm happy to provide you with the answer. Could you just try to- Iris, I think the first question is on the 12 weeks versus, again, some maybe putting together the speed and how does that differentiate versus the JAK. If I understood the second question, Kuzu, would be for you, is that from a commercial standpoint, where would you like ideally olokizumab to beat Actemra? Would that be on the efficacy, on the safety? That is what I understood from the question. That is what we understood to be and the interpretation. Okay. Iris, you want to Yeah, I can start with that. Again, fast onset of action is important, but the purpose why it is important is that you need to control the inflammation effectively, and that will apply to every treatment principle. Now, the only purpose why fast is important is control the inflammation effectively, prevent joint damage, prevent disability. I am confident about the data we have generated with Cimzia in that regard, and we will do this in an expanded way and in a pre-specified way with the ACCELERATE trial. I do not have the similar detailed insights into the JAK3 database. But again, it will have to be a combination of fast onset of action and the thoroughness of the efficacy. If I've got your question right, and I think the tail part of it was trying to differentiate it from a geographic perspective. Let me just provide context on the geography, and then I'll tell you how I would like to be there. From a geography perspective, when you do look at Europe, and let's just take Europe and the U.S. In the U.S., there's a lot more concern when you have a product with efficacy issue, because from a litigation perspective and all of it, there are more challenges there. And clearly, when you are looking at the other mode of actions, and in this case Actemra, you are seeing difference in performance, U.S. versus Europe. Now, where would I like to beat it? I would like to beat it on everything. But being a little realistic, clearly performance, the efficacy of it would be what would be important for me. Clearly, that it could be shown clinically to be different and have the efficacy there. I'd like the side effect profile to be better than what Actemra has, because then it will help us also in the U.S. market. Typical marketing you want to That's why I had to start with that. Okay. Thank you. Appreciated your comments. You're welcome. Do we have questions in the room? Here, Stephan. Please, go ahead. Hello. Philippe. One question back on Keppra. If we look at your passion of decline in Europe, it's even worse than in the U.S. And I wondered what you have been observing since the beginning of the year and in the Q4, what kind of decline in which countries? I mean, the main countries. Just to know if what you are saying today is based on what you see on some countries or just saying that more generics will come and if there is an element maybe of caution. Okay. Let me provide some more details on the Keppra side. Clearly, we have seen the entry of more generics coming on the market. As we are talking, we are seeing them come. You have to split Europe in a couple of ways. You have got countries where when a generic comes, irrespective how well they do, there are mandatory price cuts that you have to take if you want to remain reimbursed. In other markets, you may not have to do it, but patients may have to pay some copay. In a third segment is they allow generics to come, but there are mechanisms in the country to enforce the prescription of the cheapest product. We have taken a couple of steps. In some cases, clearly we have taken the step, like for example, in Germany, to go with an authorized generic of our own based on the mechanics of how it works in Germany. We believe that was a good step. Clearly based on there is about 30 generics registered in Germany. Only about 15 have come into the market, and we are still holding pretty good ground on a volume basis. Having said that, I think two things you need to keep in mind. Number one, as this is a severe disease, and clearly patients and physicians know that changing just from one product to another, and that could even be going from one generic to another generic. Patients do not all respond very well. There is a lot of caution. To that effect, in certain countries, there are physicians and there are associations that have passed certain rules and certain notices to avoid this change. What we are seeing this process go slow, but we clearly want to acknowledge that as more generic pressures continue in Europe and clearly with the economic situation, we are going to see that erosion. That is why we do want to caution you. On the second piece is we have been very effective with our affiliates and give credit to our affiliates to go country by country and see what is the best way for us to ensure they receive Keppra. That is what we are doing in the affiliates. That can hold to a certain point, but in many cases will require us to reduce our price in order for patients to continue to get Keppra, which is what we would want them to have. Do you have a further question, please? I will ask one then. My question is on anti-sclerostin. Do you think how long you have to go to prove that there is no dangerous bone growth? How long should be the long-term study? Is there any guidance? Four years, five years? When would the authorities feel comfortable? No, I think first of all, there will be study duration that is required for approval, and that will be driven by efficacy, and that will be driven by safety assessments. As I said before, there is precedent for how long studies need to run in post-menopausal osteoporosis. I think we are well prepared, and it is in our best interest to continue to observe patients. Not because we are concerned about safety. We are always concerned about safety. There is no enhanced concern there. But because we also want to learn about different treatment regimens, different cycles of treatment. There is a lot of questions that will still need to be answered after the initial approval. We are perfectly prepared that there will be a lot of more clinical work required and that we will observe patients in the long term for a variety of reasons. Safety is one of them. The range would be the human knockout. Yeah. I think that's another good point. We had talked before about the genetic validation of a sclerostin antibody as a target. You're all aware, I'm very happy to repeat the story, that there is a population in Africa with a, as we call it, a genetic knockout. They have very strong, very healthy bones. And that's based on the lack of one gene, and that's the gene that codes for anti-sclerostin. And these patients lead normal life. They have severe issues that are driven by the excess formation of bone over the entire life cycle. It's not excess formation, it's the formation of good quality, strong bone, but it's not regulated, so it continues, and it causes skull deformations and others. But that's only driven because it's lifelong. Of course, in a therapeutic setting with an antibody, you steer this with the dosing regimen you chose. In this population, there's no evidence of any carcinogenic or ectopic bone growth issue. That means that this drug is not going to be generating revenue from the same patient on repeated basis. But there will be a gap, and then you give it again, and then there will be a gap. That's something we will need to sort out. It's a new, it's an innovative mechanism. It's a unique principle. And you have different ways how you steer the efficacy. You can steer it with dose, you can steer it with dosing interval, you can steer it with frequent cycles. And all of this is to be explored. It's open at this stage. Thank you. Great. Last question. I think, very last question. We also take two last questions. We are here to serve you, but otherwise If there is no more question, thank you very much for your attention. Looking forward to seeing you in a year from now to celebrate the intense growth of the company. Thank you. Thank you. Today's call, you may now replace your handsets.

Data Source: Quartr Last updated: Mar 2, 2012

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